Just about everyone knows that taxes must be filed at least on an annual basis. However, what many small business owners don’t realize is that taxes may be dues at other times during the year! The rules for estimated taxes can be somewhat tricky; however, here is a high level overview of the basics. Please be mindful that the discussion below pertains only to federal taxes and North Carolina taxes, however, many states have their own rules regarding estimated tax payments.
How to Calculate Quarterly Estimated Tax Payments
To figure out your estimated tax you must rely on assumptions regarding your expected income and deductions/credit you are eligible for during the tax year. There are several methods that can be utilized to calculate your quarterly estimated payments. For detailed instructions on how to calculate your federal estimated payments review IRS Form 1040-ES – Estimated Tax for Individuals. For instructions on how to calculate North Carolina quarterly estimated tax payments review Form NC-40, Individual Estimated Income Tax.
Who is Required to Pay Quarterly Estimated Taxes?
Generally, if you are self-employed, a sole proprietor, a single member LLC, partner in a partnership, S-Corp shareholder and you expect to owe income tax of $1,000 or more when you file your income tax returns you must file estimated taxes.
What are Quarterly Estimated Taxes and Why Do They Need to be Paid?
Think back to your first job and your first paycheck. Wasn’t it a bummer to find out your paycheck was smaller than expected because of taxes? Well even as a business owner you are required to fork over those taxes – just at a different frequency; quarterly in this case. Paying estimated taxes is simply the method used to remit tax due on income not being withheld otherwise. This includes, but is not limited to, income from self-employment, interest, dividends, and gains on the sale of assets.
2012 Quarterly Estimated Tax Payment Due Dates
Estimated taxes are paid in on a quasi-quarterly basis. For the 2012 tax year, the due dates are April 17th, June 15th, September 17th, and January 15, 2013. If you don’t pay enough by the due dates you may be subject to a penalty even if you are due a refund when you file your annual return.
Simply Taxes, LLC is a local year-round tax preparation firm with an office located in North Raleigh. Our Raleigh accountants are ready to assist you with your questions pertaining to your taxes!
The information contained within this article is for general guidance only. As such, it should not be used as a substitute for consulting with professional accounting, tax, legal or other competent advisers.