Don't Forget About Quarterly Taxes
Many small business owners must pay estimated taxes quarterly to avoid IRS penalties and interest charges. Knowing how much to pay and when can help you manage cash flow and prevent surprises at tax time.
Who Pays Quarterly Taxes?
- Self-employed individuals, freelancers, and business owners who expect to owe $1,000 or more in federal taxes after subtracting withholding and credits.
- Owners of pass-through entities such as LLCs, partnerships, and S corporations may need to make estimated payments on their share of business income.
When to Pay:
- Payments are typically due on April 15, June 15, September 15, and January 15.
- If these dates fall on a weekend or holiday, the payment is due on the next business day.
How to Calculate:
- Estimate your expected income, deductions, and credits for the year to calculate your projected tax liability.
- Use IRS Form 1040-ES for guidance on calculating your payment amounts.
- Many business owners pay 25% of their annual estimated tax each quarter, adjusting if income changes during the year.
Tips for Managing Quarterly Taxes:
- Keep a portion of your income in a separate tax savings account as you earn it.
- Use bookkeeping software to track your income and expenses to improve estimate accuracy.
- Consider using the Electronic Federal Tax Payment System (EFTPS) for convenient, trackable payments.
- Consult your tax professional if your income varies or you need help calculating your estimates.
Final Thoughts:
Paying quarterly taxes on time helps your business stay compliant, avoids unnecessary penalties, and keeps your financial health on track throughout the year.