Categories: Tax Advice

Do I Have to Send in Estimated Tax Payments?

Estimated tax payments are a pretty straightforward topic. You probably remember that, back when you worked for someone else, you had your taxes taken out of your paycheck. You don’t get out of having to pay tax when you start your own business – the IRS still expects you to pay what you owe. But what if you’re just starting out and not making much money? Or you’ve had a bad quarter and don’t have the money to cover what you normally send in? Do you still have to send in your estimated tax payment?

If you expect to owe more than $1,000, then you very likely have to pay estimated taxes. You will also have to pay if you believe your withholding and refunds will be less than 90% of the current years tax, or 100% of last year’s tax. There are some exceptions to these rules, but by and large they will apply to most small business owners. To lessen the burden, the IRS lets you send in quarterly payments, which are normally due on the 15th of April, June, September, and the next year’s January.

The easiest way to calculate what you owe is to just go by last year’s returns. Take your total tax burden, cut it up into quarterly payments, and send it in. But if this is your first year in business, or if it feels like you’re making a lot less, the IRS has a handy worksheet for calculating your payments. The IRS will fine you if you wind up paying less than 90% of your tax bill come April, so make sure to re-calculate your payments if it begins to feel like you are making more than you thought. You don’t want to overpay by too much, but it’s better to wind up sending in too much than too little.

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Deborah Sweeney

Deborah Sweeney is an advocate for protecting personal and business assets for business owners and entrepreneurs. With extensive experience in the field of corporate and intellectual property law, Deborah provides insightful commentary on the benefits of incorporation and trademark registration. Education: Deborah received her Juris Doctor and Master of Business Administration degrees from Pepperdine University, and has served as an adjunct professor at the University of West Los Angeles and San Fernando School of Law in corporate and intellectual property law. Experience: After becoming a partner at LA-based law firm, Michel & Robinson, she became an in-house attorney for MyCorporation, formerly a division in Intuit. She took the company private in 2009 and after 10 years of entrepreneurship sold the company to Deluxe Corporation. Deborah is also well-recognized for her written work online as a contributing writer with some of the top business and entrepreneurial blogging sites including Forbes, Business Insider, SCORE, and Fox Business, among others. Fun facts/Other pursuits: Originally from Southern California, Deborah enjoys spending time with her husband and two sons, Benjamin and Christopher, and practicing Pilates. Deborah believes in the importance of family and credits the entrepreneurial business model for giving her the flexibility to enjoy both a career and motherhood. Deborah, and MyCorporation, have previously been honored by the San Fernando Valley Business Journal’s List of the Valley’s Largest Women-Owned Businesses in 2012. MyCorporation received the Stevie Award for Best Women-Owned Business in 2011.