I am a notary Signing Agent, mobile notary. When doing quarterly payments, would I claim pay on month I do appt. or when I get paid? Do I minus expenses prior to paying the 30%?
Thanks,
Kathy
Kathy,
From your question, it sounds like you are making quarterly estimated tax payments to pay your taxes on the income you are receiving from your notary income, which is not subject to withholding. In addition to self-employment income, other income to consider when making estimated payments includes earnings from interest, dividends, rents, and alimony (if subject to income taxes, but that’s another story). Taxpayers who do not choose to have taxes withheld from other taxable income should also make estimated tax payments.
We have a “pay as you go system,” which means the government wants its share of your income when you earn it. To avoid a huge tax bill at the end of the year or a penalty for underpayment, you can elect to use estimated payments. You can base your estimated payments on your prior year’s tax bill, and you can also vary the amount paid each quarter based on the income you receive for that quarter.
The estimated payments should be based on your effective tax rate, which is the average rate at which your income is taxed. It is not necessarily 30%. A good approach would be to use the information from last year’s taxes and to determine what your likely rate will be for the current year.
Deductibly Yours,
Dave