Business owners or self-employed individuals (freelancers, independent contractors) are required to make quarterly payments based on their net earnings, especially if they have a balance above $1000. Unfortunately, most business owners often neglect the importance of making estimated payments resulting in unnecessary underpayment penalties, and sometimes, penalties and interests on outstanding tax balance when they are unable to pay the lump sum of their taxes owed by April 15. Hence, it is a good habit for business owners to make quarterly payments. The deadlines for these estimated payments are:
With the recent pandemic, the Internal Revenue Service has allowed business owners to delay the first and second estimated payments to July 15 2020. While this maybe good news for some, for others, this could potentially mean that business owners would now owe half of their quarterly taxes for 2020 plus any taxes owed with their 2019 tax return all on the same date, which is July 15.
Our advise for business owners… Understanding your tax obligations ahead of time is crucial in order to stay out of trouble with the IRS. The best way to calculate your estimated payments is to know your income (profitability) throughout the year, understand your tax bracket and your effective tax rate, then calculate tax balance based on your income and your effective tax rate.
If you need help figuring out your estimated payments or lowering your estimated payments, please call us at (832) 295-3353 or please schedule your next appointment with us here > https://xqcpa-bookme.acuityscheduling.com/schedule.php. We are here for you!