IRS Estimated Quarterly Tax Payments Basics

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IRS Estimated Quarterly Tax Payments Basics
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What Are Estimated Quarterly Taxes?

• This is how the IRS collects income tax from
  individuals and businesses who are not employees
  of another company. You will make payments using
  Form 1040ES (Estimated Tax for Individuals) or
  Form 1120-W (Estimated Tax for Corporations).

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Why Are Estimated Quarterly Taxes Required?

• Employees have their taxes automatically
  withheld from every paycheck. Businesses,
  business owners and self-employed individuals are
  responsible for submitting their own taxes. To
  make sure its done in a timely manner throughout
  the year, the IRS has set up this quarterly
  payment system.

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Who Has to Make Quarterly Tax Payments

• Sole proprietors, self-employed individuals and
  corporations are required to pay estimated
  quarterly taxes.
• Exception If you will owe less than 1,000 in
  taxes for the year, you can pay them as one lump
  sum on April 15. Also, if its your first year of
  owing more than 1,000, you can pay the entirety
  on April 15.

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How Much Will Each Payment Be?

• If your income varies from month to month and
  year to year, you may be wondering how you will
  know your tax liability when you dont even know
  your income amount yet. Thats why its called
  estimated tax. You make an educated guess based
  on the past years taxes.

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• You have 2 options for calculating the estimate
  100 of the tax you paid last year, or 90 of the
  current years projected liability (whichever is
  less). The instructions for the filing form will
  take you through the steps for Social Security
  and Medicare payments, deductions and credits.

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• Once you have the amount of your total taxes for
  the year, divide that number by 4. The result is
  your estimated quarterly tax payment.
• If you cant afford to make the same size
  payment every quarter, use Annualized ES
  Worksheet (Worksheet 2-9) to calculate each
  payment separately.

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When Do You Send Payments?

• The 2019 deadline schedule is
• Q1 Monday, April 15, 2019
• Q2 Monday, June 17, 2019
• Q3 Monday, September 16, 2019
• Q4 Wednesday, January 15, 2020

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How Does It Affect Your Income Tax Return?

• You still need to file a return in April. The
  estimated tax payments you made throughout the
  year are subtracted from the amount of tax
  calculated on that form. If they were less than
  what you owe, you will have to send an additional
  payment to the IRS. If they were more, youll get
  a refund.

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• Were sure many of you have noted that you might
  have TWO payments to make in April one for
  quarterly estimated tax and one for your annual
  tax return. Not fun!

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Isnt There an Easier Way?

• The IRS imposes a small penalty for not paying
  quarterly estimated tax. Depending on the size of
  their business and how much hassle quarterly
  payments entail, some companies choose to file
  just once in April and pay the penalty.

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• Another option is to retain an accounting
  service to handle all the calculating for you.
  Xendoo tax specialists can save you time and
  headaches, not just on income tax but also on
  payroll and sales tax reporting. Youre free to
  concentrate on more profitable activities, such
  as helping your business thrive and grow.