Estimated taxes are due June 15th. How much to pay? Hmnn well you can make a payment based on your prior year income taxes paid so that you avoid penalty OR you can be more aggressive, calculate what you actually owe for the quarter and make that payment. Which do you prefer?
Personally I prefer to pay only what I owe rather than over pay and then have the government hold my money for nine months. Knowing what you actually owe does require some work. You will need accurate income and expenses for the period and you will need to run a tax modeling projector to see how much you will owe taking into account your deductions and tax rates. Worth the work? Yes!
The risk is that if you don’t pay enough tax through withholding and estimated tax payments, you may be charged a penalty. You also may be charged a penalty if your estimated tax payments are late, even if you are due a refund when you file your tax return. Is it worth it? Well the answer is different for every business owner and tax payer. Discuss with your tax advisor. How much cash do you have on hand? What will your next quarter look like? Then we can decide whether we pay at all or how much we pay.
You can always find more information on the IRS website.
Reach out to your tax advisor before you make your payment. Ask questions. Know your responsibilities. We are always available to answer questions.
And for those of you wanting a deeper dive into your tax situation, reach out to me directly and lets review your deductions together.