Going from an employee to your own boss sounds great and doing something you love everyday is inspirational. However, as a self-employed individual it is important to know that you must pay quarterly taxes.
For individuals in a sole proprietorship, a partnership, or an S-corp. if the estimated tax owed at the end of the year is over 1000 it is important to pay quarterly taxes.
When to pay Quarterly Taxes
Quarterly taxes, as the name implies, are paid at the end of every business quarter during the fiscal year. A fiscal year is a year as established for taxing and accounting purposes.
Businesses whose fiscal year starts on January 1st the due dates for quarterly tax payments are: April 17th, June 15th, September 17th and January 15th of the following year. If the tax return is filed before January 31st the fourth estimated tax payment is not due if the tax is paid in full when the return is filed.
If the businesses fiscal year does not start on January 1st and starts on a different date, such as July 1st then the estimated taxes are paid on different dates. If a tax is owed and is not paid in full when the tax return is filed there could be a penalty applied to the account.
How much to Pay
As an employee, taxes are taken out of your income automatically and the business matches the amount you pay. The employee has 6.2% withheld from there income and then the employer matches that making it 12.4% of an individual’s income goes to the government. When an individual is self-employed, they must cover the whole 12.4% by themselves because they are the employee and the employer.
There are different ways to calculate how much to pay in estimated quarterly taxes. It is possible to take the estimated the tax owed by taking the AGI, figuring out the taxable income amount, take off deductions and credits to find out about how much will be owed. However it is easier to figure out how much to pay off last year’s tax return and estimating off that.
How to Pay
The IRS has many options to help everyone be able to pay their taxes on time, in the most comfortable way for the individual. The different ways to pay the IRS estimated/quarterly taxes are:
• Pay Online
• Direct Pay
• Pay by Card
• Electronic Fund Withdrawal
• Online Payment Agreement
• Pay by Cash
• Pay by Check or Money Order
There are stipulations on some of the different ways to pay the IRS. Paying by card there is a small processing fee. Paying by cash is only possible under special circumstances and the individual must make a request. Paying by check or money order must be sent to the correct address depending on where the individual lives. To learn more on how to pay the IRS the link below shows all the possible ways.