One of the biggest changes you will face going from employee to business owner is how you pay taxes. As an employee, taxes are withheld from each paycheck so you are paying throughout the year. Once you are a business owner, however, you are required to make quarterly estimated tax payments. You can wait and pay at tax time but I do not recommend that because you will in most cases incur a late filing penalty. The IRS expects you to pay quarterly and if you do not, they ding you.
So how much should you set aside from each check you receive? This depends upon many factors including how many dependents you have, if you are married and of course the amount of business expenses will greatly impact this. The estimate that I give my clients is to put aside 25-30% of each check.
When are my federal tax payments due?
- April 18, 2017- 1st Quarter 2017 Estimated Tax Payment Due
- June 15, 2017- 2nd Quarter 2017 Estimated Tax Payment Due
- September 15, 2017- 3rd Quarter 2017 Estimated Tax Payment Due
- January 15, 2018- 4th Quarter 2017 Estimated Tax Payment Due
How do I send my tax payment in?
- Write a check to US Treasury and mail it with Form 1040-ES and send it to the address listed on the 1040-ES Form.
- Use the IRS Direct Pay Service. Note that if you pay by credit card you will be charged a fee of 2.9%.
- Use The Electronic Federal Tax Payment System (EFTPS).
Dakri Sutton, CPA – Sutton Accounting & Tax Services – www.suttonaccounting.com – (928) 493-2377