How to Calculate Estimated Quarterly Taxes

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If you're a small business owner trying to determine how and if you need to pay estimated quarterly taxes we can help. Learn more about estimated taxes.

When you have income that isn’t subject to withholdings then you must pay estimated quarterly taxes. This is the Internal Revenue Service’s (IRS) way of collecting taxes from people who don’t have them withheld from their paychecks.

Our guide on estimated quarterly taxes will help you understand who needs to pay them, how to calculate them and how to pay your quarterly taxes.

Who Needs to Pay Estimated Quarterly Taxes

Most people pay their taxes throughout the year by having them withheld from their paychecks. However, when you are self employed, you aren’t getting regular paychecks so you pay estimated quarterly taxes to cover those taxes.

There are cases when you may have to pay estimated quarterly taxes even if you are employed and your employer is taking your taxes our for you. If you receive income from the following categories you may have to pay estimated quarterly taxes.

  • Interest
  • Dividends
  • Alimony
  • Capital Gains
  • Prizes or awards

Calculating Estimated Taxes

Business owners, whether they be sole proprietors, LLC, S Corps or partners, pay quarterly estimated taxes. The payments are based on estimations of what the business owner believes he or she will make in a quarter. The taxpayers estimate their income and their deductions in order to calculate the estimated quarterly taxes.

The IRS suggests using the previous year’s income and deductions to help calculate this year’s estimated taxes. They also provide IRS form 1040-ES to help you calculate your taxes.

The important thing to remember with quarterly estimated taxes is that they are estimates. If you over or under estimate your taxes you can file another form with the IRS to fix those taxes. You should also refigure your estimates for the next quarter so that you aren’t always over or under estimating your taxes. The IRS applies penalties for incorrect taxes. Make sure you’re doing your best to make accurate estimates so you can avoid these penalties.

How to Submit Your Taxes

You can submit your  taxes in multiple ways. It doesn’t matter which way you choose as long as you meet the deadlines.

The 2017 Estimated Quarterly Tax due dates are:

  • 1st Quarter – April 18, 2017
  • 2nd Quarter – June 15, 2017
  • 3rd quarter – September 15, 2017
  • 4th Quarter – January 16, 2018

Online Payments

You can submit your taxes online through the IRS’ secure server. You’ll have the option to pay via credit/debit card or with a direct transfer from your bank account. Again, either option is completely fine. You can choose whichever option you are more comfortable with. The IRS also offers Electronic Fund Withdrawal, which is useful if you’re using accounting software or a tax professional to submit your taxes. You can also choose to make monthly payments on your taxes with an online payment agreement.

Phone Payments

The IRS offers three different ways to pay by phone. The first, is to use a credit or debit card and make a payment by calling it into the IRS. The second, is Electronic Federal Tax Payment System (EFTPS). You have to enroll in EFTPS in order to use this method. Finally, you can download the IRS’ app, IRS2Go, and make payments through the app.

Check or Money Order Payments

The IRS allows you to make payments by check or money order through the estimated tax payment voucher. However, the IRS urges tax payers to choose one of the other payment options over checks and money orders.

If you want more details on each payment method you can find them on the 1040-ES form.

If you're a small business owner trying to determine how and if you need to pay estimated quarterly taxes we can help. Learn more about estimated taxes.
Ben Sutton

Ben Sutton

Ben Sutton is the founder of Mazuma USA, an accounting firm providing tax, bookkeeping and payroll services to small businesses. Since founding Mazuma, Ben has established himself as an expert in the small business world. He’s still driven by that same desire to provide accounting help to all small businesses – from photographers, bloggers and creatives to lawyers, doctors, and dentists, everyone needs affordable accounting help. Ben is a Certified Public Accountant, and a member of the American Institute of Certified Public Accountants. But Ben considers his greatest achievement and credential to be his happy wife and four children.

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