I wouldn’t trade the ability to work in my pajamas for anything. But, the added responsibility of paying quarterly taxes as a business owner is not for the faint of heart. The implications of missed tax deadlines fall directly on you. The consequences of missing deadlines come right out of your pocket!
Here’s what you need to know about Quarterly Estimated Tax Payments and why you need to make payments on time…
What is estimated tax?
- The method to pay tax on income that is not subject to withholding paid quarterly
- Since you aren’t an employee who has the luxury of having taxes withheld from each paycheck. It is your responsibility to make an estimated tax payment to cover your net earnings each quarter.
Who needs to pay estimated tax?
- YOU! If you are a sole proprietor, independent contractor, partner, LLC member, S corporation shareholder, or a self-employed individual
- You must pay estimated tax if…
- (1) You expect to owe at least $1,000 in taxes for the year
- (2) You expect your withholding and refundable credits to be less than…
- 90% of the tax to be shown on your current tax year
- OR 100% of the tax shown on your previous year’s tax return
How much do you need to pay?
These payments can be confusing and can sneak up on you if you let it. NO ONE likes an unexpected tax bill. But, FEAR NOT, you have time and I’m gifting you with the tools! Keep reading…
Take the guesswork out of the equation. Download my FREE 1-Minute Quarterly Tax Payment Calculator to get started on not only making those payments on time but also computing what you owe more accurately. This is the handy-dandy tax tool you need to save. That way you can pull it out and use it each quarter to remove the headache and confusion from your tax situation.
What happens if You don’t make Quarterly Estimated Payments?
Making quarterly estimated tax payments correctly will save you money and eliminate stress! If you do not pay enough tax throughout the year, you will pay a penalty and interest ON TOP OF any outstanding taxes owed. Trust me, no matter how big or small the interest & penalty is, no one wants to pay extra to the IRS.
I want to stress to you that even if you are due a refund when you file your tax returns, the penalty will still apply. That means money out of your pocket that could easily be avoided!
When Are QuarterlyTax Payments Due?
The remaining estimated tax payments for the 2021 tax year are due as follows:
- Third Quarter: September 15
- Fourth Quarter: January 15 of 2022
Paying Quarterly Estimated Taxes correctly will save your sanity and your money!
Your process of calculating your quarterly taxes will never be easier.