Note: This post has been updated for the 2019 tax season.
Question: Do I have to file quarterly taxes as a small-business owner?
Answer: Yes – unless you expect to owe less than $ 1,000 in taxes to the Internal Revenue Service at the end of the class, or less than $ 500 in the casing of corporations, you have to pay estimated tax quarterly. You credibly remember a fortune of your check being taken by the state of matter and federal governments back when you worked for person else. Running your own business doesn ’ thyroxine arrive you out of having to pay those taxes and I constantly recommend meeting with an accountant to figure out precisely what you ’ rhenium expected to owe as underpayment can mean a goodly fine .
[ Related : 5 Reasons Why You Should File for a Tax extension ]
Question: Can’t I just wait till the end of the year and pay one lump sum?
Answer: No – the IRS wants to collect taxes throughout the year. If you miss quarterly payments, you ’ ll accrue penalties and interest. ( please note : If you want to pay in broad, you need to estimate your payment for the integral tax year ahead – and not every entrepreneur can make this kind of requital in advance. ) quarterly payments must be filed by the 15th of January, April, June, and September. Should 15th fall on the weekend, the deadline is moved to the following Monday.
Reading: How Often Do I Need to File Taxes?
The best way to calculate how much you owe in estimated tax is to use Form 1040-ES. The IRS offers a diverseness of avenues to entrepreneurs to make your estimated tax payments. You may pay by mail, by earphone, and/or on-line using direct pay or debit/credit options .
[ Related : Why You Should Start Thinking About the 2019 Tax Season ]
Question: What is self-employment tax?
Answer: Less discussed than estimated taxes, but equally vitamin a important to entrepreneurs, are self-employment taxes. If you are in business for yourself — a exclusive owner, independent contractor, or member of a partnership that carries on a trade or business — you are classified as freelance through the eyes of the IRS .
Self-employment tax, abbreviated as “ SE tax, ” covers what you owe for Social Security and Medicare. The IRS advises using Schedule SE ( Form 1040 ) to determine your self-employment taxes. At show, the self-employment tax rate is 15.3 percentage. 12.4 percentage is for Social Security and 2.9 percentage is for Medicare .
still not certain if you should pay self-employment tax ? calculate out your net profit or loss from your occupation by subtracting your occupation expenses from your commercial enterprise income. This helps you determine if you are subjugate to self-employment and income tax. If you are freelance with net income earnings of $ 400 or more, you must file an income tax hark back and self-employment tax .
[ Related : Does My Side Business Affect My Taxes ? ]
Question: What else affects my taxes as a small business owner?
When the tax reform bill called Tax Cuts and Jobs Act passed in 2017, entrepreneurs everywhere were concerned about how the beak would impact their businesses. It ’ south natural to have ongoing questions about these changes and taxes in general, no matter how established your business may be .
My best recommendation is that entrepreneurs with tax concerns meet with their CPA or tax preparer. Schedule an appointment early on to address any questions you may have and seek out filing aid. If you don ’ t already have one, start looking for a hope professional. Reach out to other entrepreneurs for recommendations, excessively .
meanwhile, stay organized with your records year-round. Hang on to your receipts, electronic and hard transcript alike. Keep both document types carefully organized — everyone from your tax preparer to your own self will thank you for doing this late !
Deborah Sweeney is the CEO of MyCorporation.com which provides online legal filing services for entrepreneurs and businesses, startup bundles that include corporation and LLC formation , registered agent services, DBAs, and trademark and copyright filing services. You can find MyCorporation on Twitter at @MyCorporation .
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Are you looking to open a small occupation ? here are a few more helpful articles from Deborah Sweeney to get you started :
Should I Form a Manager-Managed LLC ?
What is an EIN and Why Do I Need One ?
Do I Need a Business License ?
How to Form an LLC
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