Why Small Businesses Should Pay Attention to Quarterly Tax Payments

Owning and operating a small business can be a gratifying experience. You're your own boss, and you call the shots! But you also take on numerous responsibilities, including the calculation and timely submission of small business quarterly taxes. This ongoing responsibility may seem intimidating, but once addressed, it will help support your business's long-term tax planning initiatives. 

Use this blog to understand quarterly estimated taxes, when they're due, and the benefits of keeping on top of your finances. Common misconceptions about quarterly estimated taxes are also addressed and dispelled. 

What are quarterly taxes for a business?

Income tax is "pay as you go," meaning the IRS expects businesses to make regular payments throughout the year on revenue. Business owners and non-W-2 workers must calculate and submit quarterly estimated taxes to the IRS four times a year. Quarterly estimated tax due dates for 2023 are as follows: 

• April 18th
• June 15th
• September 15th
• January 16th, 2024

Failure to submit on time or to accurately calculate what is owed can result in fines and increased scrutiny from the IRS. IRS fines aren't fixed and will accumulate until action is taken, so it's in your best interest to submit as soon as possible, even if it's past the deadline.

The Importance of Quarterly Tax Payments for Small Businesses

Accurately calculating quarterly estimated tax payments will enhance numerous aspects of your small business.  

Cash flow management 

Cash flow management tracks the revenue going in and out of your business and lets you forecast the amount of money you'll need to have available to cover expenses. This is helpful when it comes to your estimates for your quarterly taxes. The further out you can estimate, you can even produce a rough estimate for the year, the better. It will allow you to set that money aside in advance, so you won't have to worry about finding it later when taxes are due.  

Legal obligations

Quarterly estimated tax payments are non-negotiable. Missing a deadline or submitting an underpayment will result in fees and penalties that will continue to accrue interest until the issue is addressed. Accurate, timely payments allow you to fulfill your legal obligations and provide insight into your finances while avoiding penalties for not paying quarterly taxes.

Predictability and budgeting

Accurate quarterly estimated tax payments impact your overall budget and help you predict your budgetary needs throughout the fiscal year. You can plan for other business expenses when you know how much you'll owe the IRS each quarter. 

Real-time financial health picture 

These activities contribute to a more accurate real-time picture of your business's financial health. The more precise you are in your estimated payments, the better you can understand your business's cash flow and other essential financial aspects.  

Common Misconceptions About Quarterly Tax Payments

"Are quarterly tax payments required?" and "Do small businesses have to file quarterly taxes?" are common questions due to the many misconceptions surrounding quarterly tax payments. But the most common misconceptions about quarterly estimated tax payments include: 

• Only large businesses need to pay quarterly taxes
• Quarterly tax payments are optional
• Making a lump-sum payment at the end of the year is easier

These misconceptions can cause headaches and detract from your bottom line in the form of estimated tax penalties if you're not careful. 

All businesses – including non-W-2 gig-style workers – are responsible for quarterly estimated tax payments. Larger businesses might be responsible for paying a larger tax estimate, but all businesses, with few exceptions, must pay.

Quarterly estimated tax payments are not optional, nor is it optional to make a lump-sum payment at the end of the year. The IRS will hit you with fees and penalties that continue to build interest until the tax issue has been resolved. On top of that, it can provide disruptions to cash flow and budgeting. 

How a CPA can help manage quarterly tax payments

It can be difficult to accurately estimate and submit tax payments to the IRS, which is why some businesses use a CPA to handle it for them. When a professional accountant is on your side, they'll calculate and submit your tax payments and contribute to your overall tax planning while identifying additional savings. 

Quarterly Tax Payment FAQs 

Is there a benefit to paying my estimated taxes early?

There are benefits to paying taxes early. Estimating and paying what you owe for the year allows you to get that debt out of the way. It provides a better picture of your cash flow, so you won't have to worry as much if your business experiences financial difficulties later. 

What happens if you pay too little estimated tax?

If you've underpaid your quarterly estimated taxes, you will receive notice from the IRS with a penalty. They have a specific formula for determining that fee. If you handle your own quarterly estimated taxes and aren't confident in your calculations, it's always better to overpay than underpay. 

Can you get a refund on quarterly estimated taxes?

If you've overpaid your estimated taxes, the IRS will provide a refund. You won't be penalized for paying more than you owe and will sidestep penalties associated with an underpayment. 

Partner with 1-800Accountant for all of your quarterly tax needs

You can treat quarterly estimated taxes as a pain you'll have to live with, or you get proactive and use it to help generate the insights you need to grow your business. That's easier said than done, which is why so many small business owners and entrepreneurs trust 1-800Accountant, America's leading virtual accounting firm for small businesses, for estimated tax help.

Whether it's quarterly estimated taxes, tax advisory, or any of our professional accounting services, we have the affordable solution you need to help your business stay compliant. Schedule a quick consultation – usually 30 minutes or less – to learn how we can help.