Paying Quarterly Taxes for Your Small Business
As a small business owner, understanding your tax obligations is critical. One of the first items on that list is estimated, or quarterly, taxes. In most cases, estimated taxes are the domain of the self-employed, although if you are the lucky recipient of an untaxed stock windfall you likely will have to pay them as well.
Estimated tax payments are usually owed if you expect to pay $1000 or more when you file your return. These payments are based on a quarterly schedule established by the IRS, who prefers that individuals and small businesses pay taxes almost as quickly as they earn income.
Calculating your quarterly obligations means you need to look carefully at your income, taxes, deductions, and credits for the year. Situations can vary widely, so invest in some advice from a trusted tax expert to make sure you understand what works best for your business.
Quarterly taxes are due on the 15th (occasionally adjusted for weekends) of April, June, September, and January of the next year.
If you miss a payment by a few days and think it makes sense to just bundle it in with the next one, you might want to reconsider. Best to pay it as soon after the missed deadline as you can, since interest starts to accrue right away. If you do incur a penalty you can always request that the IRS waive it; they tend to be much more interested in collecting the actual payment.
If you are a recent freelancer or an independent contractor, this is likely a new situation for you, so let’s back up a bit. When you are employed by a company, you receive a W-2, which shows how much tax has been withheld by your employers during the course of your employment that year. When you are self-employed, you receive a 1099-MISC, which calculates the untaxed income you’ve received.
However, and here’s the important part, a self-employed person can also collect income and not receive a 1099. One of the big misconceptions around this issue is that people sometimes think if they didn’t receive a 1099 then they don’t need to declare that income. That’s not correct: any income you received during the year for services rendered needs to be declared to the IRS, whether it’s captured on a 1099 or not. Keep careful records and receipts and be prepared to back up your numbers.
Making these payments is a fairly simple process. If you are filing self-employed, use Form 1040-ES and the payment vouchers that come along with it. If you’re filing as a corporation, you can pay electronically using this system.
If you have questions about this or any other tax topics, click here to get information directly from the IRS.
Or, as always, if you need legal help, don’t hesitate to contact me at the Law Office of E.C. Lewis, P.C., home of your Denver Business Attorney. Phone: 720-258-6647. Email: firstname.lastname@example.org.
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