Success is the sum of small efforts, repeated day in and day out. – Robert Collier
If yours is one of those companies structured for estimated taxes, then that means your employees don’t have their taxes withheld. This is common practice among start-ups, but several issues can be overlooked, so let’s review some important questions and answers.
- Who Pays Estimated Taxes?
You can have full-time, part-time, contract and freelance employees in this scenario. The self-employed need to pay their taxes this way. This set-up can be ideal for start-ups and companies that hire younger workers. It could also apply to owners and operators as well.
- How Much?
Estimated taxes apply when you expect to pay at least $1,000 in tax for the year. Odds are it will apply to everyone in your regular employ. Consult an accountant if you’re unsure of your amounts.
- How To Tally It Up?
Now that you’ve established you’ll owe a minimum of $1,000, you estimate your income for the full year. That can be kind of tough for freelancers and simpler for regular employees. Consider any eligible credits and tax deductions. These are items and services you need in order to perform the duties of your job: Travel expenses; hardware and software; special training, and related things. We’ve discussed small business tips this year and what sorts of items are deductible – including what applies to a home office, what you can defend to the IRS. Feel free to revert back and refresh your memory.
- When Do I Pay?
Estimated tax payments should be made four times per year – April, June, September and the January immediately following. So on January 17, 2017 you’ll wrap up your payments for 2016.
- What If I Have To Make Changes?
The way in which one sets up their estimated taxes is not set in stone. Life events, like a birth, death, divorce or relocation will very likely influence one to change estimated payments. Employees may need to change the withholdings in their paychecks. They may give you a new W-4 to reflect these changes. Take care of it immediately – it demands your attention.
- What Are The Best Payment Methods?
Here are some ways you can pay your taxes:
- Mobile device
- Phone (that thing in the house that might have a wire or docking station)
- Mail (ensure that payment vouchers accompany Form 1040-ES)