Business-Minded Legal Solutions

Self-employed? You may owe the IRS quarterly tax payments.

There are many perks to owning your own business. You set the budget, expectations and goals — but you also must assure that all laws are followed and tax obligations are fullfilled. For some, this is another perk. The ability to control these details may bring a sense of joy akin to completing a difficult puzzle. For others, the details may seem more of a required burden. Regardless of which description you can relate to, business owners must ensure the work is done.

The first step towards mastering any task is knowing the basics. One particularly difficult aspect of business ownership involves navigating tax obligations. For a pass through entity such as a partnership (including an LLC taxed as a partnership) or a subchapter S corporation, the IRS generally requires estimated tax payments throughout the year. Some business owners have two options to meet this obligation. Either the IRS can receive payment through regular withholdings or through quarterly estimated taxes.

If you are wondering whether you or your business should pay an estimated tax, you likely have the following questions:

  • Who owes the IRS a quarterly payment? Owners of businesses that are formed as a sole proprietorship, partnership, LLC taxed as a partnership, or  subchapter S corporation may owe the IRS estimated tax payments.
  • How much should business owners pay the IRS? Business owners can use their income, deductions and credits from the prior year to calculate an estimated quarterly payment.
  • What happens if business owners fail to make quarterly payments? The IRS can charge business owners who fail to make quarterly payments penalties in addition to their owed tax.  
  • When are quarterly payments due? For individual owners, the IRS requires payment for the first period on April 15, the second on June 17, the third September 16 and the fourth and final quarterly payment is due Jan 15 of 2020.