As an entrepreneur, you know how difficult it can be managing everything on your plate. From overseeing day-to-day operations to conceptualizing your marketing strategy, there are countless moving parts in the machine that is your business.
But, if there’s anything you let fall to the wayside, don’t let it be your taxes. Below, we’ll tell you a few things business owners need to know about quarterly taxes.
1. Keeping up with quarterly payments will prevent you from paying steep penalties.
Many new business owners don’t realize that paying quarterly tax deposits can save them from a lot of grief later on. It can be strange transitioning from working as a salaried employee who files taxes once a year to a business owner who’s responsible for new financial responsibilities. But it’s important to stay on top of what you owe the government throughout the year.
2. Stay organized by maintaining a file for each quarter.
Quarterly payments are usually due around April 15, June 15, September 15, and January 15. (Exact dates will vary by a few days depending on the calendar year). Keeping financial records organized by each quarter will give you a better idea of how much cash to set aside for those quarterly payments. It’s also wise to keep payment due dates in a calendar equipped with electronic notifications for added peace of mind.
Even better, hiring professionals who specialize in assisting business owners with such tasks will ensure you don’t miss a deadline or pay more than you owe.
3. How to calculate what you owe each quarter:
Taxes can be a complicated, tricky beast. As such, there are a few different ways to calculate how much your business needs to pay Uncle Sam.
– Form 1040-ES: This form includes a worksheet that can help calculate quarterly payments for sole proprietors, partners, S-corporation shareholders, and/or self-employed individuals.
– Form 1120-W: This form is generally used to calculate quarterly payments for corporations.
Because every business (and business owner) may find itself in a unique financial situation depending on any number of factors, hiring an experienced CPA will be worth every penny. Afterall, no one wants to accidentally overpay taxes — or worse — find themselves in trouble with the IRS.
4. Not sure how to submit your quarterly tax payments? There are a few ways.
The IRS gets a bad rap, but at least they offer a little flexibility when it comes to how you choose to make your quarterly payments.
– You can pay online through the Electronic Federal Tax Payment System, which the IRS says is the best option for businesses.
– You can pay using the IRS2Go app, which will instantly confirm your payment for you.
– And, of course, you can always pay the good ol’ fashioned way — by phone or mail.
5. You can be penalized for missing payment deadlines.
Although it probably comes as no surprise, failing to make your quarterly tax deadlines can land you in trouble with the IRS. Underpayment penalties are based on your income, the amount of money withheld, and many other factors. While there is an appeals process for penalties incurred, nobody wants to find out that they may not be in good standing with the IRS.
IRS fines can be devastating for a business. To avoid any penalties, it’s best to stay on top of your business’ taxes with diligence. Double-check your expected payments often (especially if your income fluctuates) and always submit your payments as early as possible.
The Bottom Line
If you’re unsure, the safest bet is to call a professional. Even if you consider yourself to be a tax whiz, at the very least you’ll save yourself a headache and give yourself more time to focus on your business.
If you’re running a new business, you may need to consult with a tax professional who can help guide you through the tax process from square one. Although managing your business finances can seem a little daunting, you should never put off financial preparations until the last minute. There are even certain self-employed individuals who may be exempt from paying quarterly taxes and certain professions (like farmers and fishermen) that follow different guidelines.
Need help planning and managing your taxes?
Revo Taxpayer Advocacy can guide you through the process every step of the way and, even better, likely save you money in the long run.
