[Next Estimated Tax Deadline: April 15, 2021]
There has been a large of amount of wholesale changes for businesses in the U.S., including New Mexico over the last 12 months due to the Coronavirus wreaking havoc on the U.S. economy by way of the nationwide shutdown back on Mar. 11, 2020. Multiple businesses and business owners were compelled to completely assess and adapt their entire profession, business, and occupation or even worse, shutdown their company, where others saw incredible positive prospects and started a new company, or business, or made capital investment.
Determining earned income and the quarterly estimated taxes due and payable to the IRS and your state tax agency is required by all business owners and other parties. Figuring out what taxes are owed and paying them on time will keep them from paying interest and penalties for underpayment of tax.
Many business owners of S Corp or partnership, gig worker, freelancer, sole proprietor, and C-corporations are usually mandated by the IRS to pay estimated quarterly tax payments if the business anticipates or estimates it will be obligated to pay $1,000 or greater when entity files its annual tax return. Taxes for workers employed by a company that receive a W-2 are withheld every pay period, so those people do not have to pay quarterly estimated taxes in most cases.
The best way for those that are subject to making estimated tax payments is to determine
a what quarterly estimated tax to pay. To do this a company should analyze its company’s tax return from last year and make an estimate for the current year’s income by annualizing and analyzing the quarter’s income to determine the quarterly taxes due. Determining the quarter tax payments due is not consistently a piece of cake that just takes a few minutes to figure out. However, it is a critical component of conducting business the right way. To keep from paying any penalties and interest or from paying less than what is owed, paying estimated quarterly taxes on the income featured below needs to be assessed:
- S Corp or Partnership Income Distributions
- Asset Sale Capital Gains
- Income from Alimony
- Large Retirement Income that Does Withhold Income Taxes Monthly
- Bond Interest
- Stock Dividends
- Real Estate Investment Net Income
- Business-for-Self Income
- Freelancer Income
- Other Income Sources Not Listed Here
Be sure to factor for federal and state taxes due and paying for your Social Security and Medicare taxes. One way to manage and account for the all the taxes due is to look at opening a bank savings account and deposit money there each month until quarterly taxes are due. By having the funds needed built up in a designated bank savings account, you will be able to manage the payment due and not have to tap into your ordinary bank cash deposit balances.
When your quarterly estimated taxes are due to the IRS, you need to figure out what you owe, refer to the information above and use IRS Form 1040-ES to report your payment or pay online. Remember these important dates, April 15th, June 15th, September 15th, and January 15th (December 15th for Corporations) of the subsequent year. These are the four due dates for the quarterly estimated tax payments for the current tax period.
Did you enjoy this article? Please share it with colleagues and friends.