Estimated Taxes

ESTIMATED TAXES

WHAT ARE ESTIMATED TAXES?

Taxes must be paid as you earn or receive income during the year, either through withholding or estimated tax payments.

Estimated taxes are quarterly income tax payments, due to the Internal Revenue Services, and possibly your States Department of Revenue, based on your earned income.

If the amount of income tax withheld from your salary is not enough, or if you receive income such as interest, dividends, capital gains, self-employment income, or prizes, you may have to make estimated tax payments.

If you are in business for yourself, you generally need to make estimated tax payments to cover both income and self-employment tax.

If you don’t pay enough tax through withholding and estimated tax payments, you may be charged a penalty, even if you are due a refund when you file your tax return.

Read the IRS Guidance on Estimated Taxes to learn more.

STAYING COMPLIANT

Know how much to pay.

The easiest way to determine if you are going to owe money, and therefore, figure out how much you need to pay in Federal Tax, is to use the IRS's Tax Withholding Estimator.

With this tool you can:

Estimate your federal income tax withholding.
See how your refund, take-home pay or tax due are affected by withholding amount.
Choose an estimated withholding amount that works for you.

Estimated taxes can also be figured manually using IRS Form 1040ES.

Make regular payments.

By making regular timely payments, you can avoid IRS penalties and help your cash flow by making smaller payments throughout the year.

In general, if you expect to owe $1000, or more, in tax at the end of the year, you should make these estimated payments:

April (for income earned Jan. 1 - Mar. 31)

July (for income earned April 1 - May 31)

September (for income earned June 1 - Aug. 31)

January (for income earned Sept. 1 - Dec. 31)

Pay electronically.

The easiest and most convenient ways to pay all of your Estimated taxes is by using either the IRS Direct Pay system or the EFTPS.

Both are free and offer different options. Learn more and compare the two platforms here.

Review your profitability.

Your business financials are one of the main parts of your calculation for determining the amount of estimated tax you should pay. And as your net profit grows, you will need to pay more estimated tax.

To assist with the calculation of your estimated taxes, the financials for your business are always available in your QuickBooks.

Review W2 withholdings.

The Federal and State withholding from your paycheck (if you're an s-corporation) and/or your spouse's paycheck, reduce the amount of estimated taxes you may need to pay.

If you're married, consider having your spouse deduct more Federal withholdings to assist with reducing your tax bill at the end of the year.

Stay up-to-date with your CFO on the Go services!

Bell Solutions guarantees that your small business will always be tax and audit ready, as long as you're up to date with your CFO Services. The financial information we prepare is needed to determine your estimated taxes, help reduce taxes, and aid with strategic planning.

CFO Client Page

Email: info@bellsolutions.biz

Phone/Text: (402) 314-8460