With the many challenges of owning your own business, the issues with tax only get more complicated. When you are working for a company, your employer will withhold Federal and State income taxes from your paycheck. They will then pay the government entities on your behalf. You, as the employee, don’t have to worry about paying income taxes up front.
If you were working full time and then transitioned to an independent contractor, saving for income taxes and paying them every quarter now becomes your responsibility. If this is your first year as an independent contractor, this may be a shock to you. If you have been an independent contractor for a long time and you get stuck with a huge tax bill at the end of the year, this is also very important for you to note. Since the IRS requires that you pay quarterly, you may be billed with interest and penalties later on if you have only been paying your taxes at the end of the year. It is very important to be putting some money aside each time you get paid to pay your taxes. Having a plan in place so you’re not unprepared is very important, and will lead to better habits that will even save you money on your tax bill.
Just like independent contractors, if you’re a first year business owner, you may be required to pay estimated taxes every quarter. It is best to get with your tax professional and just double check to make sure you are in good standing with the IRS and state government.
What You Can Do
If you’re reading this and you’re thinking “oh dang it!”, you still have a chance to get off of the IRS’ radar. If you’ve missed all year, it is still much better to pay as soon as possible than to wait until you file your annual tax return. If you do this, you reduce the chances of the IRS catching on to you and you may avoid hundreds in penalties and interest.
If you want to figure out if you need to pay estimated quarterly taxes, contact us and we will get you squared away as soon as possible. If you have any questions or just want to chat a little about it, feel free to call me and I will personally answer any questions you may have.