2nd Quarter Payments Are Coming Due!
Self-employed and other business owners should consider making quarterly estimated tax payments to avoid unnecessary penalties. If you are required to make these quarterly estimated payments, they are coming due June 15th.
One of the most efficient ways to make your quarterly payment, is to create an online an IRS Online Account. Through your account, not only can you make payments but you will have access to all of your tax information. For those that need it, there is also the Tax Withholding Estimator that can help you figure out your numbers.
It it important to keep in mind that the IRS is a pay-as-you-earn system. Perhaps you are an independent contractor and you are responsible for paying your own taxes. You are well advised to make these quarterly payments. Doing so, minimizes the stress as well as the shock factor of a huge bill when you file your tax returns.
Did You Earn Investment Income?
Estimated taxes pays income as well as self-employment taxes. Some investors who earned additional income through the sale of assets such as stocks should submit quarterly payments. Taxes are seldom withheld by the investment brokers; therefore, making estimated tax payment is well advised. The same would be recommended for retirees receiving certain pension payments where taxes were not withheld.
Investors, keep in mind that how long the investment was held before disposal, will determine the tax rate. Short-term (held for less than one year) is taxed at ordinary income tax rates. Long-term (held beyond one year) is taxed at the capital gains rate, which is more favorable.
The Importance of Good Bookkeeping
For small business owners, having solid financial records is the key in determining how much taxes are due. The amount depends on the net income at the end of each quarter. Individuals, sole proprietors and S Corps who expect to owe $1,000 or more should make quarterly payments, per the IRS. For C Corporations, the amount is $500 or more.
You can find valuable resources by visiting the IRS’s website. (https://www.irs.gov/businesses/small-businesses-self-employed)
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