As a small business owner, your daily thoughts center around improving your company. You care about optimizing your services, enhancing the customer experience, and increasing your bottom line.
But focusing on taxes? Eh…not so much.
The truth is that staying on top of your business finances sets you up for greater success down the road. In this article, we dive into quarterly tax payments: what they are, who owes them, and how to make sure you’re paying them correctly. Let’s get started!
What Are Quarterly Tax Payments?
People who work traditional W-2 jobs don’t usually have to worry about paying their taxes. Employers automatically withhold social security, Medicare, and state/federal income taxes from their employees’ paychecks. This automatic withholding ensures that the IRS receives tax payments throughout the year.
But self-employed people (go you!) are responsible for paying taxes on their own since they don’t have a traditional employer. Because the IRS wants you to pay taxes throughout the year, you’ll have to pay your taxes at quarterly intervals.
The due dates for quarterly estimates are April 15, June 15, September 15, and January 15 of the following year. Make sure you mark your calendar!
Why Do I Have to Pay Quarterly Tax Estimates?
As a self-employed coach or consultant, you probably invoice clients using PayPal, Dubsado, or another customer relationship management tool. The money you receive from these invoices does not automatically go toward taxes. Therefore, it is your responsibility as a business owner to pay your estimated tax bill to the IRS throughout the year.
How Do I Know How Much to Pay?
Knowing how much to pay in quarterly tax estimates can be tricky if you’re just starting out. After all, you don’t have an income history for your business, so how are you supposed to know how much you’ll owe in taxes?
This is where the expertise of a tax professional like Tax Savvy Jessica comes in. We know exactly how to calculate your projected income and tax liability for each quarter.
Sure, you could try to DIY by slogging through IRS.gov, translating tax jargon into plain English. Or you could leave it to the professionals, who will do all the necessary calculations and paperwork, leaving you with more of your precious free time to focus on what really matters.
Why Not Just Pay At the End of the Year?
Uncle Sam requires that you “pay as you go, so you don’t owe.” If you don’t pay enough estimated taxes by the end of the year, you could be charged a penalty and interest by the IRS. And if your payments are late, you could be charged even more. So paying at the end of the year isn’t really in your best interest.
Plus, if you fail to save up enough money by the end of the year, you could be hit with a large tax bill that you’re unable to pay. This scenario could put you behind financially, harming your business.
How Can Tax Savvy Jessica Help?
Tax Savvy Jessica believes that taxes don’t have to be overwhelming. We work with our clients to simplify small business taxes, allowing them more time to focus on what really matters in both business and life. Contact us today to learn how we can help set up your quarterly tax payments!
