The federal income tax is a pay-as-you-go tax system which means we must pay our taxes as we earn income during the year. With that said, there are two ways to pay as we go; either through employer withholdings, if you are an employee at a salon, or by paying quarterly estimated payments if you are self-employed.
If you are a booth renter, suite renter, mobile stylist, or an independent contractor, you may have to pay estimated taxes to the IRS and the state throughout the year. If you are an employee of a salon, your income is subject to withholding by your employer. Your income tax and your social security & medicare tax are withheld from each paycheck and remitted to the IRS and the state on your behalf by your employer, therefore, generally, you don’t have to pay estimated taxes.
Your quarterly estimated taxes cover your self-employment tax payments as well as your income tax payments. If you don’t pay enough tax either through withholding or estimated taxes through the year, you are charged a penalty at the end of the year when you file your taxes.
Quarterly estimated tax payments are due four times a year. The due dates are as follows:
If any of the due dates fall on a weekend or holiday, your estimated tax payments are due on the next business day.
The best way to make your estimated tax payments is by setting up an account with EFPTS (Electronic Federal Tax Payment System). This is a free system offered by the U.S. Department of Treasury to pay your federal taxes. Watch the video below for instructions on how to set up your account.