Estimated Tax for Dummies
noun
What does Estimated Tax really mean?
Hey there! So, "estimated tax" is basically the amount of tax that you're expected to pay throughout the year if you earn income that isn't subject to withholding. It's like a little bit of your tax bill that you pay every three months instead of all at once. So, if you're self-employed or if you have income from sources other than a regular job, you might have to pay estimated taxes.
Let's break it down a bit more. When you have a regular job, your employer takes out some money from each paycheck and sends it to the government to cover your taxes. But if you're self-employed, you don't have an employer to do that for you, so you have to estimate how much tax you think you'll owe and make payments to the government on your own. And the same goes for people who earn income from investments, rents, or other sources that don't have taxes taken out.
The reason why the government wants you to pay estimated taxes throughout the year instead of all at once at the end is to make sure they're getting their money on time. It's kind of like paying for groceries a little at a time as you shop, instead of having to drop a big chunk of cash all at once at the checkout.
So, to sum it up, estimated tax is the amount of tax you're expected to pay throughout the year if you have income that isn't subject to withholding, and you have to estimate it yourself and pay it in installments. It's like paying for things a little at a time instead of all at once. Make sense?
Let's break it down a bit more. When you have a regular job, your employer takes out some money from each paycheck and sends it to the government to cover your taxes. But if you're self-employed, you don't have an employer to do that for you, so you have to estimate how much tax you think you'll owe and make payments to the government on your own. And the same goes for people who earn income from investments, rents, or other sources that don't have taxes taken out.
The reason why the government wants you to pay estimated taxes throughout the year instead of all at once at the end is to make sure they're getting their money on time. It's kind of like paying for groceries a little at a time as you shop, instead of having to drop a big chunk of cash all at once at the checkout.
So, to sum it up, estimated tax is the amount of tax you're expected to pay throughout the year if you have income that isn't subject to withholding, and you have to estimate it yourself and pay it in installments. It's like paying for things a little at a time instead of all at once. Make sense?
Revised and Fact checked by Sophia Martinez on 2023-12-23 17:02:26
Estimated Tax In a sentece
Learn how to use Estimated Tax inside a sentece
- When you work as a freelancer, you have to pay estimated taxes every quarter based on how much money you expect to make.
- If you have a small business, you need to calculate and pay estimated taxes throughout the year to avoid a large tax bill at the end of the year.
- Individuals who receive income that isn't subject to withholding, such as rental income or investment income, may need to pay estimated taxes.
- If you had a lot of freelance work last year and ended up owing a big tax bill in April, you might want to start paying estimated taxes this year to avoid the same situation.
- People who have a lot of investment income should pay estimated taxes to avoid penalties and interest from the IRS.
Estimated Tax Hypernyms
Words that are more generic than the original word.