Quarterly taxes generally apply to those who are self-employed or earn income as an independent contractor. As a business owner, you are responsible for paying your own taxes because you don’t have an employer withholding taxes for you. To address this, the IRS collects estimated taxes every quarter. By the end of the year, you will either owe money if you are short on taxes or get money back, depending on how well your business does. For those handling their own taxes, here is a brief overview to understand estimated quarterly taxes.
How do I determine if I need to pay quarterly taxes?
For those freelancing and expecting to owe more than $1000 in taxes (which amounts to approximately $3000 or more in profit), you may need to pay quarterly taxes.
What do I need to track?
Track your earnings in the form of paystubs or invoices. Tracking expenses can help lower how much you owe to the IRS. Here are a few common expenses that can be grouped as an “ordinary and necessary” expense for your business: mileage, home office expenses, office supplies, and business software.
How do I pay?
To calculate quarterly taxes, refer to Schedule C and the 1040-ES. Although Schedule C isn’t required for your quarterly payments, it can be used as a useful reference to determine deductible expenses. Form 1040-ES is used to figure out your taxes. Payments can be submitted electronically or by mail.
What are the important dates and deadlines to remember for the rest of 2019?
Send the 1040-ES to the IRS by the following dates:
June 17, 2019 – Quarter 2 Estimated Tax for April and May are due
Sept 16, 2019 – Quarter 3 Estimated Tax for June, Jul, and August are due
Jan 15, 2020 – Quarter 4 Estimated Tax for Sept, Oct, Nov, and Dec are due
What are the penalties?
Penalties can range for 6-8% on the amount underpaid. Make sure to submit your documents early to avoid fees!
For more, accurate assessments and information regarding estimated taxes, contact our team of bookkeepers at Bakersmith Bookkeeping Group. Our team provides accurate, reliable assistance! Get in touch with us today.