Do I Need to Make Quarterly Estimated Tax Payments?

This question often arises for new business owners who either know their business is going to be more profitable this year than last or will owe more than $1000 at the end of the year. Most could use a friendly reminder on how to pay their estimates online, when to make them, and how it works. 

This summary of questions will help you understand when and if this becomes a factor for you. 

1. What will the business income be? (sales, expenses, profit, startup expenses, etc.) 
2. Do you have other sources of income? (W-2, rental, capital gains, interest, other businesses, etc.)
   -Are you going from having an income to no income? (For example, from a W-2 income to living entirely off the business)
   -Will your spouse still have income? (Is it W-2 income, meaning will you have taxes paid in from the withholdings from their paycheck?)
   
3. Based on those factors, what do you project your total income for the year will be? 
4. How much you have paid in (through W-2 wages for example) versus what you will estimate owing at the end of the year is the difference you need to pay in four quarterly estimates. Sometimes income can change dramatically at the end of the year, so you’ll need to adjust the amount on your final payment. The availability of cash flow at different times of the year may also impact how you pay over those 4 quarterly estimates. 

If you need to make a federal payment for personal quarterly estimated taxes, click here for instructions.

Paying by check – print this form and fill out the information: Form 1040-V Payment Voucher and Instructions. Send your check with the voucher to the address by state listed on page 2.

For more information on paying Estimated Taxes, click here.

These are all items you would discuss with an accountant for effective business and tax planning. Based on these factors, they would determine your estimates and share resources to help pay them.

Make sure to contact your accountant before making estimates, either by mailing a check or online to make sure all your bases are covered correctly. 

In our Tax Essentials online course, you will learn more about this and the key tax strategies that minimize your taxes and maximize your tax efficiency! If you want to learn more about our online tax essentials course, click here. Use coupon code ROCKNROLL to access your first online course for free. To register for one of our upcoming events, click here.

Even better schedule a complimentary strategy session and get a free complementary tax return review for potential tax-savings strategies you can discuss with your accountant.