This blog is the first in a new series for entrepreneurs called Organize your Business Finances to help those starting businesses with some of the basics of business finances.
Tips and Basics
Greetings to the Small Business Owners and emerging Entrepreneurs. We are more than half way through the year and I’ve got a question for you. Have you been paying your quarterly estimated taxes?
2018 Estimated Tax Due Dates
Quarter Revenue Received Date Due Date
1 Jan 1 – March 31 April 17
2 April 1 – May 31 June 15
3 June 1 – Aug 31 Sept 17
4 Sept 1 – Dec 31 Jan 15
Many entrepreneurs wait until the end of the year to pay their taxes, which is not the best strategy. If you are going to owe more than a $1000 in taxes, it is necessary for you to pay your taxes on the quarterly basis to avoid paying penalties and interest.
If your net income is $400 or more as a self-employed entrepreneur, you have to pay both income taxes as well as self-employment taxes. Self-Employment taxes are 15.3% of your net income. The 15.3% consist of 12.4% for Social Security and 2.9% for Medicare. Employees of companies are also subject to this tax however their employer is responsible for paying half of the obligation and if you are self-employed you are responsible for the full amount.
To help you calculate your estimated tax obligation, you can use form 1040-ES. I recommend setting money aside in an interest bearing savings account. A good starting point would be about 25% of every dollar of income you earn or if you owed in the previous year use that as a guideline for how much to save monthly if you believe your net income will be similar for the current year.
The IRS allows you to pay your estimated taxes via mail, phone or electronically. You can pay your taxes electronically through the Electronic Federal Tax Payment System® this service is provided free by the U.S. Department of the Treasury. After you've enrolled and received your credentials, you can pay any tax due to the Internal Revenue Service (IRS) using this system. Enrollment can take up to 5 days.
Paying your quarterly estimated taxes is essential to organizing your business financials. You may also consider hiring a certain financial services company to help you with your business financial needs.
Angela Mitchell is the CEO and Senior Wealth Strategist at DNA Financial Services LLC
Founded in 2015, DNA Financial Services LLC has pledged to Educate, Empower and Equip the financial DNA of its’ clients now and for generations to come. The company offers a number of financial services including tax preparation, bookkeeping, personal and business financial coaching. These services have been designed to bridge the gap in wealth building and functional money management, while promoting financial literacy for people from every walk of life.