Independent Leaders Paying Quarterly Business Taxes

: Independent Leader Quarterly Business Taxes

Launching a creative business allows you to fulfill a dream you may have had for several years, perhaps for several decades. The step toward entrepreneurialism has given you the opportunity to control your schedule, including business travel plans, more fully than when you used your talents to solely fuel an employer’s vision. In addition to schedule control, other changes owning a business may bring are more direct contact with customers, marketing and communications needs, payroll taxes (if you hire employees) and administrative tasks necessary to meet local, regional and federal regulatory requirements. One “to do” that hasn’t changed is tax filing.

Who Has to File Quarterly Business Taxes

The Internal Revenue Service (IRS) considers you to be self-employed if you are a sole proprietor, independent contractor, a member of a business or trade partnership or if you operate a business (full-time or part-time). However, if you work for an employer in addition to operating your own creative business, you may be able to absorb taxes you’d have to pay on your business profits via income tax deductions your employer takes out of your paycheck. For example, if you’re testing the waters as a business owner and continue to work part-time or full-time for another employer, you can ask your employer to increase your income tax withholdings to cover net revenues you receive from your personal business.

When to Pay Federal and State Quarterly Business Taxes

As a full-time independent business owner you generally must pay quarterly income taxes if net revenues for your company during the year equal $400 or more. You also must generally pay quarterly income taxes to the IRS if you owed $1,000 or more on your previous year’s income tax return. Work with your accountant to compute how much you should pay each quarter. You can also annualize your business’ net revenues then divide the annual profits by four to arrive at your quarterly taxes. At the end of the year when you file your Schedule C (or other tax Schedules) should the expenses to operate your business (e.g. office rental fees, traveling expenses, shipping costs) exceed the amount of quarterly taxes you paid, you can elect to receive a refund from the IRS or use the money to pay towards your following year’s quarterly income taxes. Dates quarterly business taxes are due are listed at the IRS website in their Small Business section.

Furthermore, Medicare and Social Security (13.3 percent as of 2011) are two taxes you’ll pay in addition to paying your quarterly income taxes. Depending on the state your business operates in, you might also be required to file quarterly income taxes with your state revenue or taxation department. Use form 1040-ES to file your quarterly tax payments. If this is your second year (or greater) filing state quarterly taxes, you might receive blank tax vouchers in the mail from your state revenue or taxation department with instructions on how to compute and file the taxes. In the event you don’t hear from your state taxation or revenue department, reach out to them as state quarterly filing requirements can vary from federal quarterly filing requirements.

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Sources:

http://www.irs.gov/businesses/small/article/0,,id=115045,00.html (Internal Revenue Service: Self-Employed Individuals Tax Center)

http://www.getbusymedia.com/small-business-stats/#comment-2496 (Get Busy Media: Small Business Stats for Small Business Week 2011)