The advice below is provided by Jeff Lang, CPA of camgirlcpa.com. Check him out for any and all tax help!
Quarterly Estimated Payments
Everyone has to pay taxes on the income they earn throughout the year, and the IRS expects these payments to be made as you earn the income, which they refer to as “pay as you go.” For people with “regular” jobs where they receive a W-2 at the end of the year, their employer usually withholds a chunk of money from each check and remits it to the IRS to cover these payments. As cam models, you are considered independent contractors, not employees, so you receive a 1099 at the end of the year from any source where you made over $600. As an independent contractor, the cam and video sale sites don’t withhold any money to cover your taxes so you’re responsible for making those payments in the form of estimated tax.
Estimated tax is the method of paying tax on income that is not subject to withholding, such as interest, rent, dividends, or self-employment (1099 income). The IRS requires estimated tax be paid quarterly (see schedule listed below), usually in equal amounts. The payment amount is usually based on your income from the previous year, adjusted based on any changes to your earnings in the current year. Your tax professional can help you make these calculations and determine your estimated tax payments. One incentive for making these payments is that any time your tax due at the end of the year is greater than $1,000, the IRS imposes a penalty for not making appropriate tax payments during the year. You can avoid this penalty with effective quarterly estimates.
Your quarterly estimated tax payments are due based on the following schedule:
Income earned January 1-March 31: Estimated payment due April 15 (or whenever individual tax returns are due; April 18 in 2017).
Income earned April 1-May 31: Estimated payment due June 15.
Income earned June 1-August31: Estimated payment due September 15.
Income earned September 1-December 31: Estimated payment due January 15 (of the following year).
It’s important to make your estimated payments by the deadline, but if you can’t make the full payment a partial payment is better than nothing and shows the IRS your willingness to pay what you owe. If possible, make up the missed amount during the next quarterly payment.
Keep track of how much you pay each quarter. Your tax preparer will need this information when preparing your return to make sure you get credit for the payments.
How to Pay
The IRS offers several different options for making estimated payments:
- Check by mail: Your tax professional can help you prepare 1040-ES, which is the Estimated Tax for Individuals form. You will write a personal check or get a money order/cashier’s check for the amount of your payment and send it to the address on the form, along with the voucher at the bottom of the form. Be sure the envelope is postmarked by the payment due date.
- Online via bank account: You can also make your estimated payments online using your bank account, at https://www.irs.gov/payments/direct-pay. Make sure to select “Estimated Tax” for your payment type. Using this option does not incur any additional fees. Payments are due on the due date.
- Online via credit or debit card: This option may be the most convenient for some people, but the payment processors charge a convenience fee, so we suggest avoiding this option unless it is your only method of payment. Payments can be made by choosing a processor on this website, https://www.irs.gov/uac/pay-taxes-by-credit-or-debit-card, and ensuring you select Estimated Tax when making the payment. Payments are due on the due date.
First time cam models are often shocked by how much they owe the IRS when they file their tax return at the end of the year. Much of this shock, and an IRS penalty, can be avoided by making quarterly estimates to spread your tax burden throughout the year. Contact your tax professional for assistance in calculating your estimates today to avoid a large tax bill next year!
If you would like Jeff to help with your taxes, contact him at www.camgirlcpa.com/contact/. Mention promo code “CAM10OFF” for $10 off your tax preparation fee!