Quarterly Tax Payments… Why Your Business Needs To Pay Them…

Quarterly Tax Payments

Quarterly Tax Payments... Why Your Business Needs To Pay Them...

Before we get started, this article is for informational purposes only. My Virtual BooKeeper recommends that you contact a tax professional if you have any questions regarding your businesses tax liability and filing structure. 

Who Needs To Make Quarterly Tax Payments?

A majority of Americans hold W2 employment where taxes are withheld from their paychecks. For most business owners, self-employed individuals, and freelancers; taxes are not withheld from their income. To avoid late fees and penalties from the IRS these individuals are advised to make estimated quarterly tax payments. Paying the estimated quarterly tax payments decreases the total tax liability at the end of the year and meets the IRS’s requirement for all taxes to be paid before the yearly tax due date. 

When Are Quarterly Tax Payments Due?

Quarterly tax payments are due on the following dates each year:

  • 1st Quarter- April 15
  • 2nd Quarter- June 15
  • 3rd Quarter- September 15
  • 4th Quarter- January 15 of the following year

How To Pay Quarterly Tax Payments

Quarterly tax payment amounts are typically configured by taking your previous years total tax liability and dividing it by four. The result will be an estimate of what you need to pay each quarter to the IRS. 

Your tax professional will do this automatically and can configure your estimated tax payments for you. 

For the DIY individual, tax preparation software is another option that can be utilized. 

In all cases a form 1040-ES will need to filed directly with the IRS. This form has 15 steps and it is advised to utilize your tax preparer to assist you in filling it out correctly. There are also resources on the IRS website to explain the process further. Quarterly tax payments can be made online or by mail to the IRS.

What Happens If Quarterly Tax Payments Are Not Made?

If your business does not make it’s estimated quarterly tax payments one of the following can happen: 

  1. Your tax liability at the end of year could be a very large amount. For the average small business owner or self-employed individual, coming up with thousands of dollars in a short amount of time is not feasible. The IRS will expect payment when you file your taxes and if you can’t pay you will be in a bit of a pickle. 
  2. You can accrue interest or fees on underpaid taxes. The IRS will apply interest to any underpayment over $1,000. Any unpaid amounts can also be subject to a 1/2 percent penalty per month of the unpaid balance.

How MVB Can Help

While My Virtual Bookeeper is not a tax preparation company, we can help your tax preparer by supplying them with accurate business financial data each quarter to make sure your quarterly tax payments are accurate. Let us help you make your tax filing season a bit easier by scheduling your complimentary business consultation today!

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