United States
Staffed with 100% US Employees

Estimated Tax Payments (Part 1)

March 19, 2020 by OSYB Staff

Small Business Trends shares good information on estimated tax payments. Most small business owners are required to pay estimated taxes quarterly prior to April 15. These quarterly installments are an estimate of what will be owed. These estimated tax payments are made to the IRS and sometimes the local state taxing authority.

Here are some of those who should make quarterly payments:

  • sole proprietors
  • partnerships
  • S Corporation shareholders
  • single-member LLCs who elect to be taxed as a sole prop or S corporation
  • multi-member LLCs who elect to be taxed as a partnership or an S corporation
  • self-employed
  • independent contractors
  •  freelancers
  • people with side gigs 
  • those with rental or investment income
  • those who expect to owe a $1000 or more upon filing a tax return

C corporations and multi-member LLCs who elect to be taxed as a C Corporation: If you own a Corporation, you will need to make estimated tax payments if you expect to owe $500 or more with your tax filing.

Keep in mind that for most small businesses, it’s typically the owner, not the business entity itself, who is required to make estimated tax payments. That’s because most small business entities, such as LLCs, are what is known as “pass-through entities” for tax purposes and are taxed under the individual income tax.

“Small businesses typically do not make estimated quarterly payments because most small businesses are set up as flow-through or pass-through entities, which means that all taxes are paid at the personal level,” according to Hanley. “This means that the vast majority of all estimated payments would be paid by the business owners, not by the businesses themselves.”

Who Doesn’t have to Make Estimated Tax Payments?

A small business need not pay estimated tax for the current year if it meets all three of the following conditions, says the IRS:

  • Your business had no tax liability for the prior year;
  • You were a U.S. citizen or resident for the whole year;
  • The previous tax year covered 12 months.

When are estimated tax payments due?:

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

As with all financial information,this is general information, please contact your tax professional for advice.

For full article: Estimated Tax Payments: Answers for Small Business Owners and Self-Employed

Image Credit: Deposit Photos