How to Estimate Taxes for a Variable Income
- 1). Calculate how much you expect to make this year. It does not need to be an exact calculation, but an estimate based on your variable income history. For example, if you had five major projects last year that paid you $2,000, $8,000, $4,500, $13,500 and $15,000, you can calculate your expected income this year to be around $43,000. You can adjust this number higher or lower to adjust for business being better or worse than last year.
- 2). Visit the IRS Tax Withholding Calculator website. Enter your filing status for the year and dependent status, then click "Submit."
- 3). Provide the number of dependents you have as well as information about you and your spouse (as applicable). List your estimate for the child care tax credit, child tax credit and other miscellaneous credits as applicable to your circumstances. Click on "Continue."
- 4). Fill out the details of your income and tax withholding situation as well as your spouse's (if you are married) onto the IRS website using your paycheck stub, if applicable. For independent contractors, this information can be found through invoices and the accounting books. Select "Continue."
- 5). List any itemized deductions you can claim. The IRS website will tell you which deduction claim, itemized or standard, is higher at the top of the page after you have listed itemized deductions. Select the deduction claim that is highest and select "Continue."
- 6). Note the amount the IRS Tax Withholding Calculator has determined will be your total tax bill or refund for your variable income.
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