As a new business owner you have myriad things to worry about, but perhaps none cause more headaches than taxes. From itemized deductions to self-employment tax, to payroll taxes for those small businesses with employees, issues of taxation are commonplace and worries can be a plenty. But, there is perhaps one tax issue that has a tendency to catch even the most financially-inclined new business owner by surprise- estimated taxes. Understanding what they are, why they matter, and how and when to pay them is imperative to ensuring that you won’t be paying unnecessary penalties to Uncle Sam come April.
What Are Estimated Taxes?
At a basic level, estimated taxes are taxes paid on income that is not already subject to withholding. Anyone who is subject to them must make four periodic payments to the IRS each year. So why haven’t you heard of them? When you work for an employer, your pay check reflects taxes that have been withheld. Your employer is actually paying those taxes to the IRS periodically- it all just happens without you knowing because, well, there wouldn’t be any reason you needed to. But, when you start your own business- whether as a sole proprietor, partnership, S corporation, LLC, or C corporation, your wages are no longer being withheld and periodically paid to the IRS by your employer. It’s now up to you to make those payments on behalf of your business.
Firefox recommends the PDF Plugin for Mac OS X for viewing PDF documents in your browser.
We can also show you Legal Updates using the Google Viewer; however, you will need to be logged into Google Docs to view them.
Please choose one of the above to proceed!
LOADING PDF: If there are any problems, click here to download the file.
Business Organization Updates, Tax Law Updates
DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
© The Virtual Attorney | Attorney Advertising