Alvin Ubaldo - Step-by-Step Approach to Preparing Your Estimated Taxes

When you’re self-employed or earn income that isn’t subject to regular withholding—like freelance work, rental income, dividends, or gig work—handling taxes becomes your responsibility. You don’t want to be surprised with a big tax bill (and penalties) at the end of the year. That’s where estimated taxes come in. Alvin Ubaldo breaks down the step-by-step process to help you prepare and pay your estimated taxes accurately and on time.

Understand Who Needs to Pay Estimated Taxes

Before you start crunching numbers, determine whether you’re required to pay estimated taxes. According to the IRS, you generally need to make estimated payments if:

• You expect to owe $1,000 or more in tax for the year after subtracting withholding and credits.

• Your income isn’t subject to regular withholding (e.g., from an employer), such as self-employment income, interest, dividends, rental income, or capital gains.

Alvin Ubaldo’s Tip: Even if you're working a regular job but have significant side income, you might need to adjust your withholding or make estimated payments to avoid penalties.

Gather All Your Income Sources

The next step is collecting all your income information. This includes:

• 1099 forms for freelance or contractor work

• Records of business income or cash earnings

• Rental property income statements

• Investment dividends and interest

• Any other untaxed income

You’ll need this information to estimate your total income for the year.

Alvin’s Insight: Alvin Ubaldo says to always keep detailed records—not just for taxes, but to better understand your financial health and make more accurate quarterly payments.

Estimate Your Taxable Income

Once you have your gross income, subtract any deductions you’re eligible for. These might include:

• Self-employment tax deduction

• Business expenses

• Contributions to retirement plans (e.g., SEP IRA)

• Health insurance premiums (if self-employed)

• Standard or itemized deductions

Subtracting deductions from your gross income gives you your taxable income.

Alvin Ubaldo’s suggestion: Don’t guess. Use past returns and current income projections to make realistic estimates. If you're unsure, consider using an IRS tax calculator or consulting a tax professional.

Calculate How Much Tax You Owe

Using your taxable income, calculate the federal tax you’ll owe. You can use the IRS tax brackets for the current year to determine your rate. Don’t forget to include:

• Self-employment tax: This covers Social Security and Medicare. It's currently 15.3%.

• Additional taxes: Depending on your income, you may owe additional taxes (e.g., Net Investment Income Tax).

Add all this together to get your total expected tax liability.

Pro Tip from Alvin: If you had a big income change from the previous year, avoid relying solely on your past tax return as a reference. Adjust accordingly.

Divide and Conquer—Quarterly Payments

The IRS expects you to pay taxes quarterly, not just once a year. Divide your total estimated annual tax by four. These payments are typically due on

• April 15

• June 15

• September 15

• January 15 (of the following year)

Use Form 1040-ES to file these payments.

Alvin Ubaldo’s Reminder: Even if your income fluctuates through the year, make your best estimate for each quarter. You can adjust your payments later as your income changes.

Pay On Time to Avoid Penalties

Failing to pay estimated taxes—or underpaying—can lead to IRS penalties. Set calendar reminders or automate payments through the IRS Direct Pay system or EFTPS (Electronic Federal Tax Payment System).

Alvin’s Advice: Don’t wait until the last minute. Early and consistent payments help avoid stress and financial surprises.

Keep Records and Stay Organized

Finally, save copies of all payment confirmations, 1040-ES forms, income documentation, and calculations. These will help you:

• Track what you’ve paid

• Recalculate if needed mid-year

• Prepare for year-end taxes or audits

Alvin Ubaldo says, Good recordkeeping isn’t just smart—it’s essential. Use software like QuickBooks, a spreadsheet, or a simple folder system to stay on top of it.

Final Thoughts

Handling estimated taxes doesn’t have to be overwhelming. With the right approach, it becomes a manageable part of your financial routine. Alvin Ubaldo’s step-by-step method emphasizes clarity, accuracy, and consistency. Whether you’re a freelancer, landlord, or small business owner, following these steps can keep you on the right side of the IRS—and in control of your finances.