When you're running your own business, you need to make estimated tax payments every quarter so you don't find yourself facing unexpected fines when you file your taxes. However, you need to know just how much you paid in estimated taxes so you know how much you owe in taxes come April. There are multiple methods you can use to remind yourself how much you paid during the year.
Definition of Estimated Taxes
Estimated taxes apply to any income you receive that isn't subject to tax withholding, such as self-employment income, rent, alimony and prizes. You can pay these estimated taxes each quarter by filing an IRS Form 1040-ES. These can be filed online through the IRS Electronic Federal Tax Payment System, by mail or through your choice of tax software.
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Importance of Knowing Your Estimated Taxes
Knowing how much you paid in estimated taxes is important, because this directly affects how much you will owe for the year in April. If you estimated your taxes incorrectly or if you didn't pay your estimated taxes on time, you may be charged a penalty. In contrast, if you somehow overestimated and overpaid your taxes, you may qualify for a refund.
Discovering Estimated Tax Payments Through the IRS
When you're filling out your Form 1040 taxes and you get to line 10, you'll be asked exactly how much you paid in estimated taxes for the year. This will count as a tax credit against how much you owe. At this point, you'll need to look into your IRS records to see just how much you paid via Form 1040-ES. If you paid online via the IRS EFTPS, then accessing these payment records is easy. Simply log in to your EFTPS account and check the history of all your tax payments. If you didn't pay online, you can still order a free IRS transcript and get an account of the current tax year.
Other Methods for Finding Estimated Tax Payments
You can check your bank, debit card or credit card statements for payments made around each quarter to the IRS. If the estimated tax is the only payment you'd be making to the IRS, then it would be simple to identify that information. If you made your payments through tax software or recorded your payments in your accounting software as you made them, then simply reviewing the records in your software or importing your accounting file into this year's tax software should be enough to retrieve a history of your payments.