Entertainment Business
Management, Tax and FInancial Services
I realize that the thought of reading anything about taxes is enough to put most people to sleep, but there are areas of the tax code that you should be aware of. From time to time I will provide links on this page that not only have to do with taxes but also areas of the entertainment business that I think you might find interesting. This issue will cover estimated tax payments for individuals.
Estimated Tax Payments for Self-Employed Individuals
Most entertainers are considered self-employed for federal income tax purposes. Self-employed individuals are required to make periodic, estimated income tax payments during the year to the IRS. Estimated tax is the method used to pay tax on income that is not subject to withholding (W-2 earnings from an employer).
General Rule
Many taxpayers erroneously believe that they can wait until they file their end of year tax return to pay their federal income taxes. Truth is, self-employed taxpayers generally have to make estimated tax payments during the year if the taxpayer expects to owe tax of $1,000 or more when filing their annual tax return. This is true in the case of musicians that play gigs around town in which the club, as an example, does not withhold taxes from the musicians pay, or as is the case when a musician offers private lessons at home or at a facility that does not withhold taxes from the musicians earnings. Form 1040-ES, Estimated Tax for Individuals, is used to figure and pay your estimated tax. It is important that you make your estimated tax payments during the year so that you are not penalized at the end of the year for not paying your taxes timely. If you miss the date listed below send your payment in anyway. While there might be a slight penalty assessed by the IRS for being late to the due date, it will be far less than if the taxpayer blows it off entirely.
Following are the dates that estimated tax payments are due and the periods they cover:
Due date Earnings Period covered
April 15th January through March
June 15th April and May
September 15th June through August
January 15th September through December
I have provided a helpful link below to the IRS website that will explain estimated taxes in detail and how to compute the taxes due.
http://www.irs.gov/businesses/small/article/0,,id=110413,00.html
Contact our office if you would like to discuss this area further, or any other area of federal income taxes and the entertainment field! We're here to help.
