As a small business owner, you may think that the IRS has bigger fish to fry than your small firm. But many reports have cited that the IRS is increasingly cracking down on small businesses for tax audits.
You can avoid a lot of headaches (and fines!) by understanding and fulfilling your business tax responsibilities. If this is your first time filing taxes as a small business owner, you probably have a lot of questions about how much you need to pay in taxes and when to pay it. This post will help you learn what you need to know about filing quarterly business taxes.
How Do I Go About Paying Estimated Quarterly Taxes?
The IRS says that individuals, sole entrepreneurs, partners, and corporation shareholders need to pay quarterly estimated taxes if they expect to owe $1,000 or more in taxes when their state tax returns or federal returns are filed. Small business owners can easily calculate their estimated tax payments by using Form 1040-ES.
To calculate your quarterly payment, you will estimate your expected adjusted taxable income, gross income, small business tax credits, and deductions for the year. If you’ve never filed a business tax return before, it’s best to consult your accountant or a tax professional for assistance in calculating these estimates.
Looking at your taxes from the previous year as a guide is considered the best way to estimate these numbers (if this is not your first time filing returns).
When Should I Pay the Quarterly Returns?
Here are the deadlines to file the quarterly estimated taxes for small business owners:
- April 15th (for the period of January 1st – March 31st)
- June 17th (for the period of April 1st – May 31st)
- September 16th (for the period of June 1st – August 31st)
- January 15th (for the period of September 1st – December 31st)
These dates may/will change if the due date is falling on a public holiday or a weekend.
Note: If you – the business owner – fail to submit at least 90% of the taxes you owe, you’ll be subjected to serious penalties. So please make sure you work with a skilled tax expert to calculate the amount owed and then get it double-checked. Being extra cautious never hurts.
How Much Should I Pay in Estimated Quarterly Taxes?
According to the IRS, you have to make estimated payments if the following two conditions apply:
- You expect your refundable and withholding credit to be less than the smaller of:
- 100% of the total tax on your last year’s return or 110% for higher wage earners, (your last year’s return must cover all twelve months), or
- 90% of your total expected tax for the current year (2019).
- You expect to owe at least one thousand dollars in tax for this year after subtracting your refundable and withholding credits.
How to Pay the Estimated Quarterly Taxes?
Filing taxes online is much easier, especially with the IRS e-file system. You can also any other appropriate accounting or tax software to do this, we suggest using your trusted team at Phoenix Tax Consultants.
Once you have calculated the figures, you can submit the payments online through the IRS website or the electronic federal tax payment system. You can also use your credit or debit card to make the payments.
If you want to do it the traditional way, you can file your returns by mail. Just make sure you follow all the instructions laid out by the IRS, based on the form you’re submitting. Also ensure that you mail your return to the right address; this reduces the chances of any hassle in case the IRS encounters any issues with receiving or processing your returns. And you can remit a money order or check using an estimated tax payment voucher.
For assistance with your small business tax filings contact Phoenix Tax Consultants.