Hard to believe we’re in the last quarter, and it seems like – at least this year – we’ve seen a lot of business owners “stumble” on their quarterly taxes. Perhaps it’s just a fluke, or maybe the economy? Maybe I’m just more focused on it since we’ve had to handle a few more “challenges” than normal. There’s no topic more synonymous with adulting in the business world than taxes, and today, I feel like we need to review one of the tax code’s most crucial aspects—quarterly tax payments.
Yes, this might be “Taxes 101,” but A LOT of people – including small business owners (especially new ones) – think that paying taxes is an annual affair, but let me gently pop that bubble. The IRS requires most business owners to make estimated tax payments quarterly. The idea behind this schedule is simple: Uncle Sam prefers smaller, consistent payments to a one-time annual bonanza. In return, the government has an easier time maintaining its cash flow. Make no mistake, our federal government really is in business, just like you and I.
Think of these quarterly payments as the subscription model of the tax world—just instead of getting a monthly magazine or streaming service, you get the joys of public infrastructure and national defense. Exciting, isn’t it?
The How-To: The IRS uses Form 1040-ES for estimated tax payments. This form includes a worksheet to help you calculate how much you owe. But don’t just file and forget—keep an eye on your income throughout the year. If it changes, your estimated tax payments should adjust accordingly.
The Consequences: If you miss a deadline or underestimate your tax payments, you might have to face penalties. These are neither fun nor cheap, so punctuality is key.
The Exceptions: Not every business is required to make quarterly payments. If you expect to owe less than $1,000 in taxes for the year after subtracting federal income tax withholding, you’re off the hook.
So, to recap, quarterly payments aren’t a suggestion—they’re a necessity. They help both the government and you, the business owner, manage budgets more effectively. And, let’s be honest, it’s easier to part with smaller amounts spread across the year than to write a colossal check in April.
In my ongoing mission to simplify your business operations, understanding the ‘whys’ and ‘hows’ of quarterly tax payments is crucial. After all, an informed business owner is a successful one. On the other hand, I get it – you’ve got so many things going on as an owner that all these dates and forms feel less like operating a successful business and more like mental gymnastics, let’s talk about it. Our team has the tools to handle these tasks, allowing you to focus on what really matters—growing your business.
There’s really no “mystery” to your quarterly tax payments, but, like anything you don’t automate or do often, it can be tedious and – frankly – it’s not really the core component of your company. Why try to handle it yourself?
All the best,