Tips for Paying Estimated Taxes on Business Income
Being a small business owner means that you are not an employee. Because you are not an employee, you cannot wait until the end of the year to pay your taxes.
The federal government requires you to pay an estimated net income tax every quarter. The estimated payments must also include payment for self-employment tax (Social Security/Medicare). Let’s go through some tips that can help you with this process.
First things first, you need to determine if you must pay estimated taxes. After reviewing your net income you need to look at what the IRS says you owe. The IRS says you must estimate taxes if:
You expect to owe at least $1,000 in tax for this calendar year after subtracting your withholding and credits.
You expect your withholding and credits to be less than the smaller of:
90% of the tax to be shown on your tax return
100% of the tax shown on last year's income tax return. Your tax return for last year must cover all 12 months.
Due dates for payment of estimated taxes. Estimated tax amounts are based on the amount of income for each quarter, and the due date is the 15th of the month following the end of the quarter.
How to calculate your estimated tax payments. You can do a rough estimate using forms that the IRS provides on their website. If you are needing help with this then contact me today.
Which Checking Account to Use for Estimated Business Taxes. The answer to this question isn't as obvious as it might appear. Before you decide whether to pay estimated taxes from your business or your personal account, you must first determine where the tax bill comes from.
Contact AMJ Bookkeeping if you need more help with your estimated taxes for business income.