I need to know the amount I have to take out quarterly for federal and state taxes for my husband's business. We live in Florida. Can you help me?
The amount of money you have to pay in taxes each quarter is based on your income. If your husband was in business last year and made less than $150,000, the amount of taxes you must send in by January 15 to avoid penalties must equal 100% of last year's tax bill or 90% of the total you owe for this year, minus any withholding tax paid in by either of you through work as an employee. That amount, in most cases must be paid in four even installments during the year.
For instance, suppose you and your husband paid a combined total of $14,000 in federal income taxes last year. You are working and your employer will have withheld $6,000 at the end of the year. Assuming your total adjusted gross income will be the same this year as last, you would need to pay a total of $8,000 in estimated taxes over the course of this year. ($14,000 you paid last year, minus the $6,000 withholding from your paycheck.) You would divide that $8,000 by 4 and pay in $2,000 each quarter to the federal government. You would calculate the quarterly payment for the state (and city if you have a city income tax) in the same way.
If your total salary and taxes due winds up exceeding last year's amount, you would then pay in the additional amount owed when you file your tax return for the year.
There are some exceptions to that general rule, however. If last year's income exceeded $150,000, you need to pay in 112% of the amount owed last year or 90% of the amount you will owe at the end of the year.
If the total amount your owe this year won't exceed $1,000, you can pay the amount due with your tax return instead of paying it in quarterly payments without incurring a penalty.
If your husband was not in business for himself last year and you can't predict what his total income for the year will be, the best way to handle the estimated payments is to base them on his quarterly profits. You'll need to allow 15% of his profits for federal self-employment tax (the equivalent of social security), and another percentage equal to your expected tax bracket for federal and state income taxes.
Copyright 2000, Attard Communications, Inc.