The federal income tax system is pay-as-you-go for Idaho self-employed. instead of paying your entire tax bill when you file your return, you pay your taxes in smaller payments throughout the year. This was designed to break your tax bill down into smaller easy to digest payments, instead of one large surprise you can’t afford at the end of the year.
Thus, if you are self-employed, you must administer the pay-as-you-go system yourself. You do so by paying quarterly estimated taxes.
The Basics:
You must pay quarterly estimated taxes if you have income from any of the following sources:
- Income from self-employment
- Compensation as an Idaho independent contractor
- Gains from the sale of stock or other property
- Royalties
- Interest
- Dividends
- Awards
- Any income where tax was not withheld
You must pay estimated taxes only if you owe $1,000 or more of tax at the end of the year more than what you have paid through employee withholding.
Example
Let’s say that you owe $13,000 in taxes at the end of the year, and you have already paid $11,000 through withholding – and $0 in estimated taxes. Because your tax liability is $2,000 greater than what you paid, you will face penalties for your failure to pay estimated taxes.
