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in this video we're going to talk about how to calculate your 2020 estimated taxes and i'm going to show you two ways that it's going to be super simple to do it but before we do if it's your first time at our channel or you haven't subscribed click on the subscribe button at the bottom my name is travis sickle certified financial planner helping you reach your financial goals [Applause] [Music] [Applause] so the first way that we're going to go over and do the 2020 estimated taxes is we're going to fill out this sheet which is on the irs's website and i'll leave a link in the description at the bottom now this is the way that you're going to figure out how much in estimated taxes that you will pay and then i'm going to show you an even simpler way of calculating your estimated taxes but it's really important that you know how your taxes are calculated so you don't make a mistake and you can recognize when a mistake is made now remember that your taxes are based on your income so that's your revenue minus your expenses and your deductions so you just want to make sure that you're not calculating this based on just your revenue so in this example let's use someone who's earning a hundred thousand dollars so at a hundred thousand dollars we have to subtract one half of self-employment so what we need to figure out is our adjusted gross income so if you have a net profit of a hundred thousand dollars i'm going to walk you quickly through the math on how to calculate your self-employment tax so we have a hundred thousand dollars we're going to multiply it by 0.9235 that will give us 92 350 dollars now we're going to multiply this by 0.153 and that is our self-employment tax rate so it's 6.2 percent for the employee 6.2 for the employer and an additional 1.45 for medicare on both sides that equals 2.9 so 6.2 plus 6.2 is 12.4 the 1.45 plus 1.45 is is 2.9 so 2.9 plus 12.4 is your 15.3 so if we multiply these two numbers and we have 92 350 multiplied by 0.153 equals 14 129 dollars and 55 cents we can round that up to 14 130 now that is both sides of our self-employment tax now you can deduct one half of your self-employment so we're going to divide this number 14 130 divided by 2. so divide by 2 and that's going to equal 7064. and seventy seven cents so we can round that to seven thousand sixty five dollars so what we're going to do then is we're going to take all this math that's our 14 000 130 divide by two equals seven thousand and sixty-five dollars and this is one half of our self-employment that's the deductible portion so we're going to deduct this amount from our original one hundred thousand so one hundred thousand minus seven thousand sixty five we could just take out our calculator one hundred thousand minus seven zero six five is ninety two thousand nine hundred and thirty five dollars that is our adjusted gross income for this walk through so for this walk through for line one on the adjusted gross income you expect in 2020 we can write in our ninety two thousand nine hundred and thirty five dollars now for line two we're gonna have deductions now your deductions are either itemized or the standard deduction now for most people it's gonna be the standard deduction and for this walkthrough i'm going to use married filing jointly and that standard deduction is 24 800 for 2020. so we can go ahead and write in 24 800. right online to a and then we're looking at line two b which is taking your qualified business income deduction which works out to 20 but it's 20 after we took one half of our self-employment and our standard deduction so if we subtract 24 800 from our 92 935 dollars so we'll take out our calculator 92 935 dollars minus or twenty four thousand eight hundred dollars that leaves us with sixty eight thousand one hundred and thirty five dollars now we're going to take that qbi deduction which is that twenty percent of this number the sixty eight thousand one thirty five so we're gonna multiply that by point two which is twenty percent and that is thirteen thousand six twenty seven so line two b is thirteen thousand six hundred and twenty seven line 2c is just adding our standard deduction plus our qualified business income deduction and if we use our calculator we can just add our 24 800 dollars and that's going to equal 38 427. 38 427 and then we're going to subtract line 1 from line to c so we'll clear our calculator we'll enter nine ninety two thousand nine hundred and thirty five minus our thirty eight thousand four twenty seven and that's going to leave us with fifty four thousand five hundred and eight dollars so fifty four 508. so now what we have to do is take line three and calculate our federal income tax so our federal income tax is going to be based on our 54 508 dollars so let me pull it up on the screen and these are the 2020 tax rate schedules and we're going to use married filing jointly which is right here and we got to find right where we're going to fall with our 54 0508 which is right in between these two numbers right here so what we're going to do is we're going to take our 54 508 so i'm going to pull it up on the calculator really quickly and what we're going to do is we're going to subtract the first tax bracket and that is our nineteen thousand seven hundred and fifty dollars because it's already done the math for us so the first nineteen thousand seven hundred and fifty dollars is at 10 percent and that math works out to 1975 now everything that's over in this example that's over the 19750 is then taxed at the next tax bracket which is at 12 so what we're going to do is we're going to take our 54 508 subtract our 19 750 and that is going to be our 34 758 so 34 758 of the money that we've earned is going to be taxed at the 12 tax rate again the first 19 750 dollars was at 10 so we're going to add all these up so we're going to multiply that 34 758 by 0.12 and that's going to be 4170 and then we're going to add that 1975 and that's going to give us a total federal tax liability of 6145 dollars and we can round that up to 6146. so then i'll put in on line four 6146 i'm going to skip line five because we're not going to go over amt for this walkthrough and then we're going to go to line six which is add lines four and five so that's 6146 now if you do have credits that will go on line seven in in the second example or the second method that i'm going to show you which is much quicker than this method it will also go over all of those credits so i'm just going to go ahead and put a line through that so for you if you do have credits make sure that you're taking advantage of them so you don't overpay in taxes and then on line eight is subtract line seven from line six and that'll still be our six thousand one hundred and forty six and then line nine is our self-employment tax so that was that fourteen thousand one hundred and thirty dollar calculation that we did earlier so we're gonna put in on line nine fourteen thousand one hundred and thirty dollars if we don't have any other taxes we're gonna go to line 11 a and this is going to equal twenty thousand two hundred and seventy-five so we're going to add and i'll do it for you again we're gonna add our six thousand one hundred and forty-six plus fourteen thousand one hundred and thirty and that's gonna give us our twenty thousand two hundred and seventy six so i wrote five write a six here now this is your estimated tax liability and figuring out how much you need to pay depends were you in business last year what was your tax liability last year and at least 90 of this year's taxes but in reality this is your estimated taxes so you're going to need to pay this amount if this is what you actually earn throughout the course of the year so let me show you an even quicker way to estimate these taxes and also to check your work if you were doing it by hand like we just walked through so this is going to use the irs form w-4 online estimator and you can actually still use this to calculate your estimated taxes and i'm going to show you how so let me pull it up on the screen so we're going to choose married filing jointly no one else can claim this as a dependent we don't have any dependents for this walk through we do have an income and we're just going to choose one job for one of the spouses just to keep it as simple as possible and then we're going to say we have no pension now here is where you need to pay attention because what we want to do is we want to click on earn net income from self-employment and that will allow us to put in our profits from our business so we can also calculate our self-employment tax because that's really important you can't just put it in as a job because the self-employment taxes are calculated differently so we're going to go ahead and check off that box and click on next now did we have this job all year now let's say that you didn't have another job but we just want to use the estimator we could just put in zeros for the w2 side so i can choose this and say we get paid whatever weekly choose whatever date and then we're just going to say that we're going to earn zero dollars for the year and we didn't pay anything in federal taxes or withholdings we're going to choose no and no now this is where you want to put in that hundred thousand dollars as you can see your net self-employment income so i'm gonna put in a hundred thousand dollars and then we can see what it does now we didn't pay any estimated taxes at this point of course if you did it would lower what you need to pay moving forward now we're going to click on next adjustments to income let's just say we make no adjustments to our income click on next we're going to take that standard deduction and you can see right here what we chose before was mirrored filing jointly it's going to automatically show you what it is it's that 24 800 that we did in the paper walkthrough and then we're going to click on next and here's where you can look at your tax credits now for example let's say you have dependents and they're under the age of 17 well then you can you can take the child tax credit which is two thousand dollars so that would reduce your total tax liability but in this walkthrough i'm just going to click on get my results so we can see exactly what it looks like and then i'm going to click on next and we can see we have the exact same number that we calculated twenty thousand two seventy eight and before we calculated twenty thousand two seventy six so it's a little bit of a rounding error two dollars off not a big deal but what we can also do is scroll down on this page and see the math that we worked out previously so you can see that our total adjusted gross income right here was that 92 935 which is our hundred thousand dollars subtracting one half of our self-employment and where's our one half of self-employment it's right there at seven thousand sixty-five dollars then we have our standard deduction at twenty four thousand eight hundred and then you can also see our adjusted gross income after the deductions at fifty four thousand five oh eight you can also see our taxable income before our credits so that is our federal tax liability and over here we could see the 14 130 which is both sides of the self-employment calculation so that is that 7.65 for the employee and the 7.65 percent for the employer but in this instance you get to subtract one half of self-employment that's why it doesn't work out to exactly 15.3 percent when you're self-employed now you want to be careful about using any of the other estimators when it comes to your estimated taxes because sometimes you might not realize that some of those tax estimators are only for 2019 or the previous year and they haven't been updated to the current tax year so using this w4 calculator could be an easy way for you to do it or you can use the paper version just two really quick ways that you can figure out what your estimated taxes should be and what you're going to pay now on a quarterly basis is when you need to pay your estimated taxes you could simply take this number divide by four and then pay it or as things change and you can make adjustments to figure out what you've paid previously and what you need to pay moving forward this is again a really simple way of doing it so that is the way that you can calculate your 2020 estimated taxes if you've enjoyed this video be sure to subscribe and leave your comments down at the bottom [Music] foreign