Estimated tax payments, every one’s favorite topic, right? NOT. However, they are an important aspect of owning and managing a business. One area that many individuals and businesses forget to account for is making sure they are paying in to the federal and state the correct amount of estimated tax payments through out the year to cover for income made. So, let’s delve a little deeper into this topic.
What is an estimated tax payment?
Estimated taxes are a way of paying income tax on income that was earned but has not had anything withheld on it. So, imagine you are an employee. When you get a paycheck (“income” for your personal household) your employer will withhold federal and state income taxes from this check and pay it to these agencies on your behalf. This then will show up on your tax return at the end of the year and can even result in a refund. So, as a business owner or income earner with no withholding, estimated payments are needed to pay those federal and state income taxes.
Who pays estimated tax payments?
Estimated tax payments can be paid by anyone who has income that does not have withholding. This includes self-employment, business earnings, interest, rent, dividends and other sources. Estimated tax payments must be paid if you expect to owe at least $1000.00 in tax for the current year after subtracting previous withholding and refundable credits.
How much should you pay?
This is a loaded question, but typically it is paid in four equal installments based on either prior year income tax calculations or current year. This is an important conversation to have with your tax accountant to ensure that you do not receive a penalty for not paying in enough throughout the year.
When are they due?
Estimated tax payments are due four times a year. They are not on your typical quarter end dates, so the dates below are important to note:
June 15, 2018
September 17, 2018
January 15, 2019
Therefore, don’t forget to include these payments in your business strategy and personal finance planning. They are important. If you have any questions regarding estimated tax payments, please feel free to contact us!
Written by: Kelly Johnston
Did you get hit with a large tax bill for 2017? Have you not made any payments yet?
This week the IRS began sending out notices and tax bills for those that did not pay their tax bill in full. Thanks to technology and new processes there are many new ways to make these payments this year. Tax payers can use systems like Direct Pay, EFTPS (Electronic Federal Tax Payment System), initiate a credit or debit card payment, check or money order, and other payment options.
With the year about half way over, don’t forget to check in with your tax accountant for tax planning and ways to reduce your tax bill in 2018. It is not to late to engage your team.
Contact JFS, LLC today if you have questions or to schedule an appointment.
Come join us January 16th at 6:00 pm for a dinner that will discuss cash flow, budgeting, tax preparation goals, and accounting system decision making. This will be hosted at the Travelodge located at 718 Horizon Drive, Grand Junction, CO 81506. The cost will be $20.00 per person for the evening. This includes the meal and learning materials. Please RSVP to firstname.lastname@example.org. We hope to see you there.
Cash flow is paramount in business success. Understanding your different service or product lines, revenue they produce, and matching expenses to these items can assist in determining profitability and productivity. As year-end approaches, businesses should take this time to not only reconcile transactions within their books for year-end reporting, but also prepare a budget and cash flow projections to set up next year for success. The budgeting process should include projections in income, fixed and variable expenses, as well as any capital purchases that will be needed for that year. Many accounting software providers then allow this budgeted information to be loaded into their system allowing clients to compare budget to actual performance throughout the year.
If you have any questions regarding budgeting, please do not hesitate to reach out.
I am so excited to welcome you to my new website. As I continue to grow my business look here for more information and some great content regarding accounting, navigating starting a business, and personal growth and development. This is an exciting time in business and I cannot wait to share this excitement with you.
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