Going from an employee to a boss sounds great, and doing something you love everyday is inspirational. However, as a self-employed individual it is important to know about paying quarterly income taxes.
When to pay Quarterly Taxes
For individuals in a sole proprietorship, a partnership, or an S-corp. if the estimated taxes owed at the end of the year are over $1,000, then it is important to pay quarterly taxes.
Quarterly taxes, are taxes 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 then the estimated taxes are paid on different dates all depending on when the fiscal year starts.
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, the amount paid to the government in taxes is about 19% of your income. This is broken down into three taxes, federal income taxes, social security, and medicare.
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 based on the amount owed last year.
How to Pay
The IRS has many options to help everyone pay their taxes on time, in a way comfortable for the individual. Some 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 which changes depending on where the individual lives.
To learn more on how to pay the IRS the link below shows all the possible ways.