Importance of Quarterly Taxes for a Small Business

Business income is not a fixed monthly amount like an employee's salary. Therefore the IRS allows small businesses to estimate business income and pay small buisness taxes quarterly. These new rules were put into place in 2000 to help small businesses maintain a better cash flow and decrease the amount of correspondence sent out by the IRS. However, as a small business owner, if you estimate incorrectly you may end up paying additional taxes at the end of the year.

Quarterly Estimated Taxes trips up many small business owners. Failure to keep up with estimated tax bills can create cash flow problems as well as IRS penalties: If you don’t pay enough in estimated taxes by the deadline, you could be charged a penalty for every day you’re late (the rate usually is around 8% per year). Small business owners should also remember that the size of your quarterly tax estimates will need to increase in order to cover the total yearly increase in taxes.

Also, keep in mind that April 15 isn't the only important tax date for small business owners. The following deadlines are also important to keep in mind:

• Estimated taxes are due four times a year: April 15, June 15, September 15, and January 15.
• Sales taxes are due quarterly or monthly, depending on the rules in your state.
• Depending on the size of your payroll, employee taxes are due weekly, monthly, or quarterly.
• The due date for corporations with a calendar tax year is March 15. If a corporation follows a fiscal year, taxes are due two-and-a-half months after the end of the fiscal year.

For help wih questions about small business taxes or quarterly taxes for a small business, please contact us.