Quarterly tax payments: Who should pay them and when

With so much attention on Tax Day, other tax deadlines are easily overlooked, including quarterly tax payments.

Believe it or not, your income tax is a pay-as-you-go system for qualifying businesses and certain individuals. In fact, if you’re a business owner or have other types of taxable income such as capital gains, you may need to file quarterly taxes in order to avoid an IRS penalty.

What are quarterly taxes?

Quarterly taxes are how small business owners and self-employed persons pay taxes to the IRS throughout a tax year if your income exceeds a certain level. The amount of quarterly taxes that you have to pay will vary from business to business. 

Do I need to pay business quarterly taxes?

Individual taxpayers don’t generally need to pay quarterly taxes, but it’s a different story for small business owners.

“Individuals, including sole proprietors, partners, and S corporation shareholders, generally have to make estimated tax payments if they expect to owe tax of $1,000 or more when their return is filed,” notes the IRS.

The general rule is that you need to make estimated tax payments and file Form 1040-ES: Estimated Tax for Individuals if both of the following apply:

  • Your estimated tax due is $1,000 or more
  • The total amount of your withholding and refundable credits will be less than the smaller of:
    • 90% of your current year’s tax liability
    • 100% of your previous year’s tax liability

When are quarterly tax payments due?

If you meet the requirements for paying business quarterly taxes, write down the following dates, as payments for the tax year are due every quarter on these dates:

  • April 15
  • June 15
  • September 15
  • January 15

If these due dates fall on a Saturday, Sunday or legal holiday, the payments are due the next business day.

How do you go about paying quarterly tax payments?

The forms you’ll use for filing and paying quarterly tax payments will vary depending on the type of small business you have.

  • Individuals (self-employed persons, members of partnerships and sole proprietors) – You will use 1040-ES to submit your quarterly tax payments.
  • Corporations – You will use Form 1120-W to submit quarterly tax payments for your business.

You can mail a check or send the form and your payment electronically.

Calculating and filing quarterly taxes can be a daunting task. Especially, if you’re trying to run a business. If you don’t want to tackle paying quarterly taxes alone, our Quarterly Tax Payment Service can help. When you work with your team at Block Advisors, you can add this service to your tax prep for $99.

What happens if you don’t pay quarterly tax payments but should?

If you didn’t pay enough tax throughout the year, you may incur an underpayment penalty. The penalty is a complicated formula; it’s imposed on the amount of underpayment for the number of days it remains unpaid, starting with the first quarter’s payment.

 Refer to Publication 505, Tax Withholding and Estimated Tax for additional insight.

Where can you turn to for help with paying taxes quarterly?

Do you have additional questions about paying taxes quarterly? Block Advisors is here for you. You can also get help with paying estimated taxes for your small business with our Quarterly Tax Payment Service to ensure you’re paying the lowest amount in quarterly taxes for $99 — a value of $150.

And, as always, you can choose to make an appointment at any time.

“My small business tax pro was professional and engaged and provided a plan for quarterly tax withholding.”

W. Leighton Haynes, Elevation Brand Studio, LLC | April 2021

 

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