Should You Be Making Quarterly Payments? - Molen & Associates

Stay Ahead of Law Changes & Protect Yourself Against Being Audited: Corporate Transparency Act and Reasonable Compensation

Should You Be Making Quarterly Payments?

Tackling your taxes as a small business owner can often feel like a high-stakes game of strategy and a little guesswork. One of the key moves in this intricate game is mastering the art of quarterly tax payments. If you’re looking to stay ahead in the tax arena and avoid last-minute scrambles, navigating quarterly payments is a smart move that can save you time, money, and ensure a smoother tax season. In this blog post, we’re diving deep into the world of quarterly payments, arming you with the knowledge to make informed decisions and strategically position your business for success.

Understanding Quarterly Payments:

The Basics Quarterly tax payments, also known as estimated tax payments, are a proactive approach to managing your tax obligations throughout the year. Instead of waiting until the end of the tax season to settle your dues, quarterly payments allow you to distribute your tax liability into four manageable installments. This strategy is particularly relevant for small business owners, freelancers, and self-employed individuals.

The Why: Should You Be Making Quarterly Payments?

The decision to make quarterly payments hinges on your financial situation and income sources.

Consider these scenarios that make quarterly payments a smart tax move:

Self-Employment Income: If you’re self-employed, your income isn’t subject to traditional withholding taxes like those in a W2 type of employment. Quarterly payments help you stay on top of your tax obligations.

Fluctuating Income: Small business income can be erratic, with lean months followed by prosperous ones. Quarterly payments allow you to adjust your tax payments based on your actual income. Smooth Cash

Flow Management: By spreading your tax payments across the year, you can maintain a steadier cash flow. This reduces the financial strain of a lump-sum payment during tax season. Quarterly payments enable more accurate budgeting, as you’re setting aside a consistent percentage of your income for taxes.

Penalty Avoidance: By making timely quarterly payments, you can avoid underpayment penalties that might accumulate if you wait until tax season to pay your taxes.

More information on how Quarterly Payments help avoid penalties:

To avoid a penalty, pay your correct estimated taxes on time. Find how to figure and pay estimated taxes.

You may avoid the Underpayment of Estimated Tax by Individuals Penalty if:

– Your filed tax return shows you owe less than $1,000 or
– You paid at least 90% of the tax shown on the return for the taxable year or 100% of the tax shown on the return for the prior year, whichever amount is less.

Plotting Your Quarterly Payment Journey: A Step-By-Step Guide

Estimate Your Annual Income: Begin by estimating your total annual income, factoring in all potential income sources.

Calculate Your Tax Liability: Deduct your anticipated deductions from your estimated income to calculate your tax liability.

Divide and Conquer: Divide your estimated tax liability by four to determine your quarterly payment amount.

Mark Your Calendar: Quarter deadlines are your checkpoints. Make sure you’re aware of the due dates – typically in April, June, September, and January.

Payment Platforms: Set up an account with the IRS’s Electronic Federal Tax Payment System (EFTPS) for seamless online payments or use payment vouchers if mailing your payments. When in doubt, just give us a call – we’d be more than happy to help!

Conclusion: Steer Your Ship, Don’t Drift

Quarterly tax payments might seem like another chore on your to-do list, but they are your ticket to a smoother, more controlled tax journey. By navigating quarterly payments, you’re not just making payments; you’re steering your financial ship in a strategic manner that aligns with your business’s unique needs and income fluctuations. By staying ahead of the tax curve, you’re avoiding penalties, reducing stress, and positioning yourself as a proactive and financially savvy small business owner.

So, embrace the smart tax move of quarterly payments and put yourself in the driver’s seat of your tax destiny. With each installment, you’re not just paying taxes – you’re staying ahead, staying informed, and ultimately staying successful.

The Molen & Associates Difference

Mike Forsyth

“Super helpful and timely. This is our first year with them and we look forward to trusting them with our taxes and business books for years to come.”

Caitlin Daulong

“Molen & Associates is amazing! They run an incredibly streamlined process, which makes filing taxes a breeze. So impressed with their attention to detail, organization, and swift execution every year. Cannot recommend them enough!”

Sy Sahrai

“I’ve been with Mr. Molen’s company for few years and I felt treated like family respect and dignity. They are caring, professional and honest, which hard to find these days. Love working with them.”

Unlocking the Benefits of Charitable Contributions: A Guide to Maximizing Your Tax Advantages

Unlocking the Benefits of Charitable Contributions: A Guide to Maximizing Your Tax Advantages In the realm of personal finance and tax planning, charitable contributions emerge as a powerful tool not only for supporting causes close to your heart but also for...

Detailed Guide on Cryptocurrency Taxation and Reporting

Detailed Guide on Cryptocurrency Taxation and Reporting  In the United States, the Internal Revenue Service (IRS) has clear guidelines on the taxation of cryptocurrency, which is considered property for tax purposes. This classification has significant implications...

Gig Economy Taxation: a Detailed Overview

Gig Economy Taxation: a Detailed Overview Reporting Income as a Gig Worker Gig economy workers must report all income earned from their endeavors. This includes, but is not limited to: Earnings from part-time, temporary, or side gigs. Income not reported on...

Standard Deduction vs. Itemizing: A Comprehensive Guide for Small Business Owners and Self-Employed Individuals

Standard Deduction vs. Itemizing: A Comprehensive Guide for Small Business Owners and Self-Employed Individuals   As tax season approaches, one of the most significant decisions you’ll face as a small business owner or self-employed individual is whether to take...

Real Estate and Taxes: A Comprehensive Guide

Real Estate and Taxes: A Comprehensive Guide Real estate taxation is a multifaceted topic that encompasses various forms of taxes, including income tax, property tax, and sometimes even sales tax. Whether you’re dealing with personal or business real estate,...

Steps to Filing a Tax Extension

Is Filing an Extension Bad?   We get this question probably a thousand times a year. An extension is not inherently bad, it is truly personal preference. An extension will not increase your risk for an audit or red flag your return with the IRS. In fact, it is...

How to Pay Your Child From Your Business

How To Pay Your Children From Your Business Paying your children through your business can be a strategic way to manage your business's taxable income, while also providing your children with income and potentially teaching them about the value of work.  While it is a...

Tax Tips for Newlyweds

Tax & Financial Tips for Newlyweds in Houston Marriage is a significant milestone that not only unites two individuals in partnership, but in most cases, also merges their financial and tax situations. For newlyweds in Houston, understanding the tax implications...

Self-Employment Taxes: A Deeper Dive

Self-Employment Taxes: A Deeper Dive Self-employment taxes are a critical component of the tax system in the United States, impacting individuals who work for themselves. Understanding the nuances of these taxes can help self-employed individuals plan and manage their...

Education Tax Benefits: Maximizing Savings with Credits and Deductions

Education Tax Benefits: Maximizing Savings with Credits and Deductions Navigating the complexities of tax season can be daunting, but for those bearing the costs of higher education, there are valuable tax benefits that can ease the financial burden. Among these are...

Request an Appointment Today

13 + 8 =

Call us at

Pin It on Pinterest

Share This