Why Worry About Taxes When You Have a Calculator For Quarterly Tax Payments?

Estimated tax penalties, which are imposed when a taxpayer underpays their taxes, are on the rise, according to the IRS. From 7.2 million in 2010 to 10 million in 2015, there was a nearly 40% increase in the number of people who paid this penalty. The fine might range from hundreds to thousands of dollars.

To prevent these penalties, the IRS recommends taxpayers to routinely review their taxes. By changing the amount of withholding from their paychecks or the frequency of their anticipated tax payments, penalties can be avoided. This is really important for those who work in the sharing economy, have multiple occupations, and have recently undergone major life changes, including a recent marriage or childbirth.

If you run a business, you must decide to pay quarterly estimated taxes. Even while sending tax payments to the IRS every three months may seem tedious, it could benefit your company.

When done properly, projected tax payments help you better understand your finances and save unpleasant surprises during tax season. Using a quarterly tax payment calculator and the information in this guide, you will learn everything you need in order to successfully file estimated taxes.

What distinguishes estimated quarterly taxes from estimated annual taxes?

All the taxes your business owes to the IRS for the whole year are broken down into four components in your quarterly estimated taxes. You make payments for your taxes throughout the year rather than paying them in total at the end of the year. 

If you’re self-employed, you’ll need to pay your taxes four times a year instead of one lump sum in “estimated” installments. It’s called “estimated” because you’re paying taxes on how much money you anticipate making this year (income tax, self-employment tax, and any other applicable taxes).

Anyone self-employed also needs to pay the self-employment tax, including Social Security and Medicare taxes, which gets recorded on Schedule SE. Some people may be wondering if they will get other tax forms, like 1099 forms or W-2. The 1099 vs W2 causes confusion, but 1099s are only given to self-employed individuals who made $600 or more in business income. And of course, like any other tax forms, be sure to follow the schedule for the IRS 1099 due date.  

How do you determine how much to pay? 

You can figure out your anticipated taxes on your taxable income with the help of Form 1040-ES if you want to make the payment using a check or money order. Either you or your accountant can perform the calculations. To determine how much you owe, make sure the income declared and deductions claimed on your prior year’s federal tax return are similar to the current year.

Make that your prior year’s tax refund has been transferred to this year’s taxes by checking again. The deadline often occurs on the fifteenth of April, June, September, and January. The deadlines for the quarterly tax dates 2022, however, have been established for April 15, June 15, September 15, and January 18, 2021. (2022).

The deadline will be the following business day if the date that it’s due falls during the weekend or a legal holiday.

Those who paid taxes in the current fiscal year 

Your fiscal year will decide your due dates if it differs from the calendar year in any way. In order to meet all deadlines, taxpayers who select a different fiscal year should speak with a tax preparer or accountant. They can also utilize a quarterly tax payment calculator to determine the precise amount of tax due.

Can you make more than four payments at once?

Yes, you may submit as many payments as you wish at any point during the quarter. You’ll need to make further payments if you underpaid for a quarter and need to make up the shortfall. This may occur if you earn more in a quarter than you anticipated. 

What counts is that you pay the right amount by the quarterly due date, not how many payments you make. In the event that you underpay your taxes, the IRS will assess a penalty.

The four benefits of paying your anticipated taxes on time every three months

Consider your options carefully before deciding to forgo all quarterly payments and pay the balance in full at the end of the year. There are benefits to paying estimated taxes, and doing so doesn’t have to be complicated.

Use this calculator to determine your quarterly tax: 

1. You avoid mischief.

Quarterly payments are very important to the IRS. If you pay in one lump sum and ignore the rules, you will almost certainly receive a fine. In the long term, it is not worthwhile to put off payments for the sake of your business.

2. It safeguards you from the year-end tax shock.

You won’t be caught off guard by a large tax amount when the tax year ends if you’ve made quarterly payments. Yes, you can pay less than you should and have to make up the difference, but that’s nothing compared to having to deal with all of your taxes at once. Budgeting for quarterly payments also makes it easier on your cash flow than paying a sizable sum all at once. 

3. Your knowledge of your cash flow will improve.

To make payments on time each quarter, you must monitor your financial flow. Cash flow might not be on your mind if your business is still in its early stages of development and you don’t have many expenses to consider. However, when your business expands, it gets harder to ensure you have enough cash available for all your expenses. Establishing sound financial practices now will help you plan your quarterly taxes in the future. 

4. You can develop a friendship with your accountant and bookkeeper.

It’s a good idea to plan your cash flow with the help of your accountant and bookkeeper; they may prevent you from paying too much or too little, and working with an accountant compels you to look closely at your financial procedures, which is a good thing. When your business is still in its early stages, having an accountant review your accounts and help you instills in you the habit of keeping your bookkeeping organized. As a result, making important business decisions, filing taxes, and making development plans are all made simpler. 

It might seem like a hassle to pay estimated quarterly taxes four times a year. However, by paying your estimated tax bill in advance of tax season with the aid of a quarterly tax payment calculator, you may actually lessen your tax burden if you schedule these payments properly.