What should I be doing to prepare my business for the end of the year?
As a business owner, it’s your responsibility to prepare your business for the end of the year. That includes reconciling accounts, organizing your books, and preparing to submit your information to the Internal Revenue Service, either on a tax return if you’re a corporation if you’re a sole proprietor, or on an information return if you are in a partnership or LLC. That would include not only cleaning up the books, and reconciling accounts but organizing them for your tax preparer to timely and easily file your taxes.
Now, not everyone can file their taxes on the due date. Entity due dates are March 15th, and individual and other entity due dates are April 15th. You may need to go on an extension if elements of your business are not ready on or before those dates. Give your tax preparer plenty of time and give them plenty of notice if you need to go on an extension, and you should start thinking about that now and preparing to pay those taxes by doing projections.
How will I know what I owe in taxes?
By preparing your books and records, organizing your notes, and reconciling accounts, you should be able to
see a general idea of what your tax bill will be for this fiscal year. Another way you can accomplish this is by doing a proper tax projection with a tax preparer or tax professional. They will be able to estimate your tax liability
for the current year and project what you can do now to ameliorate that problem and what you can do going
forward to be more tax efficient.
What are estimated tax payments?
W2 employees have their taxes taken out of their paychecks every pay period. The employer pays some and the employee pays some, and together, they are sent to the government. Some are employment taxes, which are reported on certain forms, 940 and 941, which are the tax on your payroll, and some are withholding taxes that are made for the employees’ accounts. However, if you’re an entrepreneur and a business owner you may not have a steady paycheck. If you don’t have a steady paycheck and do not withhold your own taxes, you must estimate what you will owe during that year. The IRS would like you to make those payments quarterly, estimating what the tax will be due, dividing it by four, and paying it four times a year.
Should I make estimated tax payments?
If you project that you will owe tax this year, you should make estimated tax payments. These payments should reflect either 90% of what you owe in this year or 100% of what you owed last year. That would put you in the safe harbor and eliminate underpayment penalties.
When do I make estimated payments?
The Internal Revenue Service would like you to make estimated payments four times a year. The first quarter is paid with your taxes on April 15th, the second quarter on June 15th, the third quarter on September 15th, and the last quarter on January 15th. That being said, these are estimated payments, and if there is an unusual spike in income or drop off in income, you can adjust the future quarters and you can also make additional payments through pay.gov or by mailing in your estimated payment with a fourth, fifth, or sixth coupon.