We’re coming up to the end of the second financial quarter of the year! For most employees, tax season is over, but you’ve got other responsibilities if you’re a small business owner or otherwise self-employed.
If you’re self-employed, it’s up to you to turn in estimated income tax payments every quarter. However, small businesses should pay attention to quarterly tax payments if they want to avoid any potential fines or fees later on.
Many tax deadlines were delayed in 2020 because of the pandemic, but the IRS has not modified the estimated tax deadlines in 2021. So you still have to make your regular payments.
For new business owners just starting, this might be a strange, novel process to you. Don’t worry about it! Read on to find out how to keep up with these IRS payments.
When Are Q2 Estimated Taxes due?
Your Q2 estimated taxes are due on June 15, 2021. The IRS requires estimated taxes on income to be paid as you go throughout the year. Therefore, for the second quarter deadline, you can pay your estimated taxes on the income earned in that quarter, or you can simply pay a quarter of what you expect your final income tax to be.
If you don’t pay enough during the year, the IRS may impose an additional late penalty when you report your income on your next annual tax return. However, it’s easy enough to avoid having any problems later on if you keep track of these deadlines.
How Do I Pay My Quarterly Taxes?
To calculate and pay your quarterly estimated taxes, you need to know how much income you’re earning. Following IRS form 1040-ES, you should use your expected income and deductions to calculate the final tax you expect to pay in a year, and then you can pay a quarter of it. Corporations will use IRS form 1120-W to calculate their estimated tax.
If you think your annual income is likely to be similar to the previous year, you can take the easier route and use last year’s total as your estimate for 2021. Then you just need to pay a fourth of that each quarter.
Don’t worry about underestimating your income for the current year. If you work with last year’s total tax due, you should be safe from any penalties. In addition, you should be exempt from further quarterly payments or penalties once you have paid 100% of what you paid in the previous year.
Where to File Payments
The best way for a business to pay their quarterly taxes is through EFTPS, the Electronic Federal Tax Payment System. This gives you a secure online platform for scheduling or filing your payments directly and keeping track of your past filings.
All you need to set up an account is your social security number or employer identification number. Register for an account online or over the phone, and you’ll receive a secure PIN for your account in the mail.
Direct payments can also be made to the IRS online without an account, but you will have to record and keep track of your payments yourself.
Who Pays Quarterly Estimated Taxes?
Everyone who earns income in the United States is expected to pay federal income taxes and to pay into the system during the year. Depending on the terms of employment, however, each person may or may not have to handle these payments directly.
Employees can file IRS form w-4, employee’s withholding certificate with their employer, which allows the employer to withhold a portion of their income and pay the estimated taxes on their behalf.
For self-employed business owners, however, there’s no one else who’s going to pay the taxes for you. Independent contractors and employers need to pay quarterly estimated taxes on their own income according to the IRS deadlines.
There are some other exceptions and requirements, however. You almost certainly have to pay estimated taxes if you fit one of these categories:
- Business owners of a sole proprietorship or partnership who expect to owe $1,000 or more in income tax at the end of the year
- S corporation shareholders who are likely to owe at least $1000 in total taxes
- Corporations must also make estimated tax payments if their total tax due will be at least $500 when they file their return
To be entirely exempt from paying estimated taxes, you must have had no tax liability in the last full year, and you must have been a citizen or resident in the U.S. for that entire period.
2021 Quarterly Estimated Tax Payment Deadlines
You’ve already passed the first quarter tax payment deadline in 2021, and you’re about to hit the second one already. Here are all four deadlines this year:
- Q1 Estimated tax deadline: April 15, 2021
- Q2 Estimated tax deadline: June 15, 2021
- Q3 Estimated tax deadline: September 15, 2021
- Q4 Estimated tax deadline: January 15, 2022
Because January 15, 2022 is a Saturday before a holiday, your payment will technically not be due until the next business day, which is Tuesday, January 18, 2022.
If you miss one of these deadlines, don’t give up and wait for the next one. Go ahead and turn in your estimated tax payment as soon as you remember, even if it’s a few days or weeks behind schedule.
Questions on Paying Estimated Taxes? Contact 1-800Accountant
Don’t panic if you’re not sure how to handle this process. Paying estimated taxes is an essential task, but you’ve got time to learn if you don’t have it figured out. Get help from an expert who can guide you to meet your obligations and plan for success.
The professionals at 1-800Accountant can prepare you and your business to meet your obligations easily and efficiently. They’ll teach you everything you need to know about small business taxes and make the whole process smooth and stress-free.
This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. 1-800Accountant assumes no liability for actions taken in reliance upon the information contained herein.