The 2018 Small Business Week started April 29, 2018 and runs through May 5, 2018. This annual event, hosted by the U.S. Small Business Administration, is the celebration of the contributions by entrepreneurs and small business owners.
I wanted to continue my series of posts related to the 2018 Small Business Week with some information about estimated tax payments.
Generally, if you are a small business owner who does not receive a paycheck with federal income tax withheld, then you probably need to make estimated tax payments. Also, if you are making extra money with a side hustle or a sharing economy side job, you probably need to make estimated tax payments. I’ll also point out that even if you only receive your income through a paycheck, if your withholding isn’t enough, you will need to make estimated tax payments.
The intervals for the payments are referred to as quarterly tax payments but they aren’t quiet on a quarterly basis. The due dates for these payments are based on the period of time used to calculate your income. Businesses also have estimated tax payment requirements but they have slightly different dates. Here is a breakdown of the payment dates and the time period used to calculate the tax due for self-employed individuals and entrepreneurs:
- Due Date April 15 — First quarter payments are based on the time from January 1 through March 31.
- Due Date June 15 — Second quarter payments are based on the time from January 1 through May 31.
- Due Date September 15 — Third quarter payments are based on the time from January 1 through August 31.
- Due Date January 15 (of the following year) — Fourth quarter payments are based on the time from January 1 through December 31.
Special things to note about these payments:
- If the due date is on a weekend or legal holiday, the due date is generally the next day that is not a Saturday, Sunday or a holiday.
- When you calculate the payment each quarter you are allowed to take into account the withholding from your paycheck and any previous estimated tax payments.
- There is a penalty for not making a payment when it is due.
Your tax preparer or tax preparation software should be able to provide you with a schedule of the amounts to pay and the dates to make the payments based off your prior year tax return.
For further reading on how to do the calculations, the IRS has some great resources:
- Small business & Self Employed Estimated Taxes
- Publication 505 (2018), Tax Withholding and Estimated Tax
As with all things tax related, I recommend that you visit with your tax preparer to go over your estimated tax payment calculations and the amount to pay on each required payment date. It is also a good time to revisit the withholding on your wages (if you have any) because the tax law changes could have an impact on the amount that you need to pay with your estimated tax payments.
Please use my contact page if you need assistance with your estimated tax payments.