Do I Need To Pay Quarterly Taxes – Quarterly taxes are important for small businesses, but not everyone knows the top tips for having a smooth tax year. To stay ahead of your quarterly small business tax payments, it’s important to know what taxes are and how they’re calculated, whether you have to pay quarterly, when your payments are due, how to meet them, and how to know if you’ll receive fine or penalty for tax problems.
Please remember that this material is intended to provide you with useful information and should not be relied upon to make decisions, nor is this material intended to be or be construed as legal advice. You are encouraged to consult your attorney for advice regarding your specific business operations and obligations under applicable law. Trademarks used in this content are the property of their respective owners and no affiliation or endorsement is implied.
Do I Need To Pay Quarterly Taxes
If you want a beautiful garden, you need to spend time mowing, edging and watering. Similarly, if you want a healthy business, you must observe all the necessary maintenance – and that includes accurately satisfying all tax obligations.
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Because of their size and structure, many small businesses are required to make estimated tax payments at quarterly intervals, rather than in one big chunk at the end of the tax year. Even though these “quarterly tax payments” are often required, not all small business owners know how they work – and what could happen if you screw up.
Unfortunately, the IRS doesn’t take too kindly to breaking the tax laws, even if you had no intention of breaking the rules. According to tax preparer Intuit, if you file a few months late, your minimum penalty will be $435, with a maximum penalty of 100% of the taxes you owe — effectively doubling your tax burden. With margins already tight, tax penalties could dampen any hopes of small business profits.
As a small business owner, it’s better to do things by the book, whether it’s paying your taxes or performing a thorough pre-employment screening through a service like ShareAble for ® . Just like inadequate employee screening, reviewing your tax liability can easily come back to bite you. Big time.
Not paying taxes – or not paying the right amount on time – can result in fines and penalties, interest charges, audits, damage to your company’s credit rating and creditworthiness, potential reputational damage, potential lawsuits, and more.
Must Know Quarterly Tax Tips
This article helps provide five essential tips to help you prepare for quarterly small business taxes throughout the year and help you avoid huge potential penalties.
According to the Internal Revenue Service (IRS), estimated quarterly tax payments are regular (usually 4x per year) payments that individuals and businesses make to the IRS to pay advance income, self-employment, and other taxes throughout the year.
Just like the annual April application, quarterly payments are based on your income. If you pay too much, you can get a refund. However, if you do not pay enough, there may be penalties.
These estimated tax payments spread your tax burden, which has several benefits, as well as some challenges, including:
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Overall, regular payments help you stay in good standing with the IRS and ensure your business runs smoothly without last-minute financial burdens.
Pro Tip: Learn how to optimize your tax filing strategy year-round with these top small business tax filing tips.
Not all small businesses are required to file taxes quarterly, but many are. This is because many small businesses lack the formal job and salary structure of large companies.
Please note that the above requirements are for federal taxes only. You may have to make quarterly tax payments to the government as well. In some cases, the thresholds that require an application may be higher or lower than the federal level.
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Please note that this is only a general guide and not an exhaustive list. Individual tax situations can vary greatly, so it’s important to work with a qualified accountant or financial professional with ant questions.
Again, contact a professional accountant if you have questions about your own tax obligations or filing requirements.
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On top of all your other responsibilities, calculating the tax you owe every few months can be confusing and time-consuming – especially if you’re not a tax professional. That said, there are a few things you can do to prepare for the quarterly tax deadline.
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According to Balance, a good rule of thumb is to set aside 25-35% of your quarterly income for taxes. This helps ensure you have enough money to pay when the tax bill inevitably arrives at the end of the quarter.
There are several different ways to calculate how much you owe in taxes each quarter. Because you can be penalized for insufficient payment, it is important to evaluate correctly.
If your income fluctuates throughout the year, such as increases or decreases in the summer, it may be better to calculate your debt based on your actual income for that quarter.
The IRS provides a worksheet — Form 1040-ES — to help figure out what you owe each quarter. Or, if you prefer a more high-tech option, you can find several automatic calculators online, including the following:
Quarterly Tax Dates Remember This!
Note that these are not specific recommendations, just general examples. Make sure you verify that companies are legitimate and trustworthy before using any service.
The IRS has set payment deadlines for quarterly tax payments. Fortunately, these deadlines are the same every year. You pay taxes for the previous quarter, right after it ends.
You can avoid missing these payment deadlines by 1) adding them to your electronic calendar as annual events and 2) considering using an electronic payment method, so your IRS payments don’t arrive late.
Here are the annual estimated quarterly tax payment dates. Note that not all quarters are the same length or exactly three months.
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Note: If these due dates fall on a Saturday, Sunday or statutory holiday, payments are due on the next business day.
As with any law, breaking tax rules can get you into trouble. The most common problems with quarterly tax payments are paying late, paying too little, or missing the filing altogether.
Under the Brotman Law, there are penalties for non-payment and late payment. This can apply at both the federal and state levels. In addition to standard penalties, you may also be charged interest or surcharges.
This means that if you continue to put off doing your taxes and paying your bill, interest can accumulate and the amount you owe can increase significantly.
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Additionally, even if you overpay for the year, you may still be penalized if one of your quarterly payments was below the required amount for that quarter. Because of this, it’s important to carefully calculate what you owe each quarter. IRS Form 2210 can help you calculate potential penalties.
If you owe more than you paid or are fined, you’ll likely receive a bill in the mail from the IRS stating what you still owe. However, if you overpaid for the year, the IRS may also take your penalty off your refund and just send you the difference back.
Pro tip: As you protect your business from financial shocks, it’s important to also protect yourself from people who might commit financial crimes. Make sure you perform proper screening, including background checks and credit reports before hiring new employees.
On top of the five key quarterly tax tips mentioned above, there are some smaller steps you can take to set yourself up for an especially smooth tax year. Here are some ideas that might make your tax preparation a little less painful:
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Pro tip: As a small business owner, keeping proper records is key. This is the case whether you are handling financial data or the three types of essential personnel records.
Just like growing award-winning roses, meeting quarterly tax requirements takes a fair amount of work—and a few inevitable encounters with thorns. However, some smaller businesses, such as in-depth pre-employment screening through ShareAble for, are both very easy and help protect your business from unexpected stings.
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Paying 2022 Tax Estimates
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