Tax Form 1040ES InstructionsPublished:
Easy Instructions for Tax Form 1040-ES
The IRS has a couple of different 1040s.
Every individual taxpayer filing a federal tax return grabs a 1040. Since federal withholding is common, some individuals can calculate their tax liability on the most commonly-used IRS form 1040 EZ, claim any refundable credits, and be done for the year.
Then there’s the 1040-ES form.
The ES stands for estimated taxes, including social security taxes. It’s for individuals who don’t have tax withholding on their income. Independent contractors, business owners, sole proprietors, and limited liability corporations or partnerships use 1040-ES to determine, file, and pay their tax liability before the tax year end, usually in quarterly payments.
The 1040-ES functionally has two parts:
- A worksheet for estimating your federal taxes to pay in the upcoming 12-month period
- Four tear-off vouchers you’d send with your quarterly taxes
Think of a 1040-ES tax form like an installment agreement with the IRS. Instead of withholding parts of every paycheck, IRS 1040-ES form lets you schedule payments and make four quarterly payments through the upcoming year. Keep in mind, there are special tax rules for higher-income taxpayers. Not everyone is a tax professional, but you can easily make acceptable estimates for your quarterly taxes and avoid having to pay any underpayment penalties. It’s also wise to fill out these forms before saving up for any quarterly payments.
Let’s go over the right way to fill out the form 1040-ES estimated tax worksheet.
Filling Out Your Form 1040-ES Worksheet the Right Way
How much income will you earn in the coming year? Use last year’s income tax return to estimate your quarterly taxes. You can use last year’s adjusted gross income (AGI), taxable income, taxes, any self-employment tax deductions, business credits, and tax credits to estimate the coming year’s taxes.
You can work through the 1040-ES questions by category pretty easily. Out of 15 lines on the Form 1040-ES worksheet, only a couple are worth calling out.
Line 9 asks for your self-employment tax totals. Take 92.35% of your net profit from self-employment, then multiply it by 15.3%, the self-employment tax rate (Social Security and Medicare).
Line 10 for “other taxes” refers to lines on your last year’s 1040. For instance, you would add up lines 8 to 12 and 14 to 17z from 2021 and put it on line 10 of your 1040-ES 2022 form.
Line 14 (broken into two parts) checks whether you even need to pay quarterly taxes.
Line 15 shows how much you should put on your quarterly payment, as in the 1040-ES payment vouchers on the next pages.
If you are filing as a Corporation, you should use IRS Tax Form 1120-W to calculate your estimated tax. Note that a corporation’s estimated tax payments must be deposited electronically. For more information, see IRS Publication 542 (Corporations) and/or the Instructions for Form 110-W.
^ Example of the important lines to fill out on the form 1040 ES
What’s the difference between estimated taxes and regular income taxes?
Estimated taxes are the money owed to the IRS from forms of income that never passes through federal income tax withholding. Self-employed individuals, consultants, freelancers, or small business owners all receive income that’s not taxed at the source.
A few examples of income you’ll need to make estimated payments on include:
- Taxable unemployment compensation.
- Rents, dividends, and interest earnings.
- Retirement benefits.
Try to estimate your income as accurately as possible. First, you’ll avoid being subject to penalties if you estimate too low. Then, you’ll avoid overpaying during the year if you estimate too high. You might get hit with an underpayment penalty if you don’t make your quarterly deadlines. It doesn’t matter if you’re owed a tax refund on your income tax return.
If you estimated your earnings too high or too low, simply complete another form to recalculate your estimated tax for the next quarterly payment form.
The easiest way to pay these quarterly installments is with a debit or credit card online. Both individuals and businesses can pay online using the Electronic Federal Tax Payment System (EFTPS) at irs.gov/etpay. You can use other methods of payment including mailing a check or money order payable to the United States Treasury. However, your online account also shows your payment history.
Each payment period has a specific due date based on your organization’s tax year. Typically, the four tax payments fall on April 18, June 15, September 15, and January 15 the following year. Sole proprietors, self-employed individuals and freelancers generally follow the calendar year. A limited liability corporation, on the other hand, may follow a different tax schedule. If you’re not sure about your schedule, ask those questions to a trusted tax professional.
More tax forms or items you might need this year
Along with your Form 1040 for your federal tax return and your Form 1040-ES package, you may also need:
- 1040 Schedule 2 for the “other tax” and additional income taxes.
- 1040 Schedule A for itemized deductions.
- Publication 505 about tax withholding and estimated tax.
- Publication 519, which is a tax guide for resident aliens.