When you own a business, you are responsible for paying taxes. Unlike personal taxes, the IRS wants your business to pay its taxes quarterly, four times throughout the year. Businesses that pay their taxes quarterly avoid the mad dash to pay taxes in April, overpayment, and penalties.
Who Is Responsible for Quarterly Taxes?
Although paying estimated taxes may seem like an inconvenience, paying your taxes is mandatory for the self-employed. These are people who receive income that has not been subject to withholding.
A person who freelances with other businesses or individuals is paid everything they have earned once they receive the money for their work. The company or individual paying them has not withheld taxes. As a result, the freelancer is responsible for paying estimated taxes.
A business that receives payments for services or products from customers should be making estimated tax payments. The payments their customers made is not taxed; therefore, the business owes the IRS.
Although the tax code is complicated, paying your quarterly taxes does not have to be complicated. In fact, once you have done it a few times, you will not be so overwhelmed by the idea of filing your estimated taxes quarterly.
Filing Your Quarterly Taxes
Business owners where a lot of hats, but filing taxes should not be one of them. You should consider hiring a tax professional to do your taxes to ensure that your business is sending the right amount of money in each quarter. If you send too much, you are preventing your company from having access to much-needed capital. If you send too little, then you are placing a burden on your business once a year to produce the shortfall.
Your tax professional will complete your taxes using form 1040-ES. They will look for withholdings and refundable credits to decrease your tax liability to the IRS. You can expect that your tax professional will do this on the 15th of January, April, June, and September so that your business will remain compliant. Once completed, you simply send in a check or pay your tax liability electronically.
Of course, you have the option of completing and filing your taxes yourself; however, hiring a tax professional saves you time and money. Additionally, you get the benefit of their expertise without breaking a sweat trying to figure out the tax code.
If you are self-employed, then you should consider paying quarterly taxes instead of waiting to pay taxes once a year. Quarterly taxes are manageable and paying quarterly allows business owners to avoid tax penalties. Business owners who do not feel equipped to handle taxes should outsource their taxes to a tax professional so that they can continue to focus on their business.