Earlier today, one of our fine customers tweeted at @harvest to say that Harvest’s printer-friendly reports have helped to make the process of calculating estimated taxes a breeze. Since making quarterly estimated payments to the state and federal governments are a requirement for all freelancers and businesses based in the U.S., we followed up with her to get more information. Jennifer, a freelance front-end web developer based in Illinois, was kind enough to follow up and share a detailed explanation of how Harvest simplifies her process for making estimated tax payments on a quarterly basis.
Taxes can’t be described as fun, but I actually don’t mind the process of doing my estimated taxes each quarter. I made it as easy as possible on myself by doing a few things at the start of the year. First, I grabbed the 2009 1040-ES form for the IRS. Before I printed it out, I filled in the information that wouldn’t change- my name, social security number, and address- on each of the four forms. I printed that sucker as well as four envelopes with the IRS address (The address for your region is on page 6 of the 1040-ES PDF) and my return address. I’m based in Illinois, so I did the same thing for the IL-1040-ES state form (use google to find your state’s 1040-ES form). I also marked the four estimated tax due dates in my calendar to remind myself a week before-hand that they were fast approaching!
The due dates for estimated taxes as well as the timeframe for each are as follows:
- April 15, 2009 (payments received from January 1 – March 31, 2009)
- June 15, 2009 (payments received from April 1 – May 31, 2009)
- September 15, 2009 (payments received from June 1 – August 31, 2009)
- January 15, 2010 (payments received from September 1 – December 31, 2009)
Putting in this extra effort at the beginning made me feel super organized about the whole process. It allows me to grab two forms and two envelopes and start crunching some numbers. That’s where Harvest comes in!
I do my estimated taxes by payments received (instead of hours invoiced, which is another option), so each quarter I create a Payment Report by navigating to Invoices > Report > Create New Report. I check off Payments Received Report, change the timeframe to custom so that I can select the appropriate quarter dates, and leave Clients set to All.
The first time I printed a Payment Report, I was pleasantly surprised at how clean and simple it looked. It’s perfect to file for my records. I do the math right on that print out so that everything is together. I multiply the total payment by my state tax percentage (3%) and cut a check to the Illinois Department of Revenue. On the check, I make sure to note the form name (IL-1040-ES) and my social security number. I do the same thing for the IRS. The percentage for federal tax is a little bit trickier to figure out. It’s based on your income as well as if you’re filing as a single, head of household, or jointly with your spouse. There’s a handy worksheet on page 5 of the 1040-ES form to help figure out the correct percentage. I’m lucky enough to have an accountant in the family, so I also asked his advice on the right percentage for me. I err on the side of caution by overpaying now and possibly getting a tax return later rather than underpaying now and having to pay extra later.
Finally, I slap a stamp on those pre-printed envelopes and make a photocopy of the envelope, the estimated tax payment voucher form, and my personal check for both the state and federal taxes. I keep those on file with my Harvest Payment Report. And Bam! I’m ready to get back to making money!
A big thanks to Jennifer for taking the time to share her tip with the rest of the Harvest community. We love hearing stories like this, so if you’d like to share a small business tip involving your use of Harvest, let us know!