At John F. Dennehy CPA, one of the most common questions we receive from businesses is "Do I need to pay quarterly taxes?" Unfortunately, the answer to this question depends on the type of business you own as well as other factors.
Even though April 15th is the well-publicized tax deadline, certain types of business and individuals do have to pay quarterly taxes. When you add the required quarterly tax payments on top of the mounds of other tasks and responsibilities staring at small business owners, it can seem overbearing.
Fortunately, the experienced accountants at John F. Dennehy Jr. CPA offer an entire complement of services designed to make your life easier. We offer:
Our accounting services are designed to save you time and money. Most importantly, we'll alleviate your concern over preparing and filing your quarterly taxes. Continue reading to learn the answer to the question "Do I need to pay quarterly taxes?" and other important information.
Who Is Required to Pay Estimated Quarterly Tax?
As a general rule, you should pay estimated quarterly taxes if your tax liability is more than $1,000 for the year. The following groups of people are typically required to pay estimated quarterly tax payments:
- Sole proprietor business owners, self-employed people, and independent contractors.
- S-Corp shareholders, partners, and corporations.
- Individuals who owed taxes from the previous year — even non-business owners. If you owed taxes last year, it most likely means you had other income that increased your liability or you didn't have enough held from your paycheck. This will signal the IRS that you should be making estimated quarterly tax payments.
Do I Need to Pay Quarterly Taxes if I'm Self Employed or a Sole Proprietor Owner?
If you're self-employed or a sole proprietor, you're fully responsible for the complete control of your business. One of the most important components of this responsibility is examining your tax framework to determine if your sole proprietorship will be required to pay quarterly taxes.
If you are self-employed, the IRS views as a kind of business, and there are specific tax regulations that may require you to pay quarterly estimated taxes.
If you are self-employed, you will probably not be required to pay quarterly taxes as long as:
Any one who doesn't fall into the above categories will need to pay quarterly estimated tax amounts.
Because they are estimates, they do not have to be precise down to the penny, but the payments should be close to what will actually be owed. If you pay too much in an estimate, it will be refunded in the same way your personal federal tax withholdings are refunded.
Do I Need to Pay Quarterly Taxes for an S-Corp?
If you are a partner, owner, or shareholder of an S-corporation, there are special tax laws that relate to you. If your business expects to have taxes of at least $500, you will probably need to pay quarterly estimated taxes.
This will depend, however, on a number of decisions regarding how the S-corp chooses to reward shareholders. For instance, if they are designated as employees, the IRS may closely watch the payouts to these employees. It is highly advisable to contact an experienced accountant if you have questions about S-corp taxation issues because filing mistakes can result in the termination of S-corp status.
What Happens if I Don't Pay Your Quarterly Estimated Taxes?
As the IRS likes to be apprised of your income on a regular basis, they do not look fondly on skipping out on quarterly taxes. If you are 60 days late to file, a minimum penalty of $100 is levied. If the tax payment is less than that, the penalty will be equal to the total payment amount.
Other penalties include:
These penalties highlight the seriousness that the IRS places on the timely payment of these estimated taxes. However, this pertains mainly to those who are either intentionally tardy or deceptive in their payments. If a reasonable effort is made to estimate the taxes but the estimate is wrong, the IRS generally does not punish such a mistake.
Contact John F. Dennehy for Experienced Accounting
It is crucial for individuals or businesses to get professional accounting assistance. At John F. Dennehy, we offer several years of experience helping business owners and individuals navigate the quarterly tax issues. Instead of worrying about the unknowns or intangibles that go into an estimated tax payments, trust the accounting professionals at John F. Dennehy CPA to handle your tax needs.