Quarterly Taxes

If you pay estimated taxes on a quarterly basis (Form 1040-ES), you may owe less on your annual tax returns or even get money back. In order to receive more money back, more money has to be paid in every quarter. If no tax payments are made during the tax year, all taxes are due on the return due date of the subsequent year, please see the Internal Revenue Service (IRS) website for due dates specific to your entity.

The quarterly tax payment form is called a tax voucher, which is due about 15 days after every quarter end.  Tax vouchers may be mailed to various states, or paid directly on the IRS website. On the 1040-ES, there is also a schedule to help you estimate the taxes owed, but any payment amount is accepted.  Be sure to keep a copy of each voucher for your records and show it to your Tax Accountant when you file your annual return.  1040-ES forms should be filed by subcontract workers or the self-employed, see the IRS website for more forms.

If you happen to be behind on your taxes, a payment plan can be set up, but related penalties and interest rates still apply to the balances owed.  Also, you must notify the Internal Revenue Service (IRS) if you want to go on a payment plan to pay off your outstanding taxes; otherwise, they will automatically seize your bank accounts to get their money.  See penalties and payment plans on the IRS website.

Besides state and federal taxes, there may be city and county taxes that are owed for doing business there.  City taxes are based on gross earnings and county taxes are based on business property.  These taxes are usually due on a quarterly or annual basis and they are based on their general estimate.  Always save your property appraisals and tax records, in case there is a discrepancy.  Also, be sure to respond to them immediately, because they are legally allowed to charge you their estimate if you do not respond in time.

Tax rates go up and down depending on the outcome of events during the year.  For this reason, official tax rates are not available until the year is over.  In addition, the actual tax rates you pay every year depend on which tax bracket you are in, which is based on your taxable income (Gross income- adjustments- deductions- exemptions).

Tax accountants follow IRS regulations.  Every year certain tax rates change and others stay the same.  Search the IRS website for any tax items.

For self-employed individuals who hire subcontractors, be sure the subcontractors complete form W-9 before working. This form provides the information necessary to complete form 1099-MISC, which totals up their services for the year. Form W-9 should be kept in a locked environment since it contains confidential data such as social security numbers or employer identification numbers (EIN). Issuing a form 1099-MISC ensures a deductible expense, because the same amount will be taxable to the subcontractor. It is recommended to send form 1099‑MISC as soon as the year is closed, because it allows time for subcontractors to request a change in the amount reported if figures do not match.

For employers with employees, be sure to file Form 941 regarding your federal taxes every quarter, see tax due dates on the IRS website. Employers who hire subcontractors must also send forms 1099-MISC annually.

For an individual, the taxing process starts with how many allowances are being claimed on form W-4. Every employee should be required to complete this form before working, as this provides the information necessary for payroll processing. Be sure to keep these forms in a locked environment, since these forms contain confidential information, such as social security numbers.

The concept of allowances and tax refunds goes as follows: The more allowances you claim on form W-4, the less taxes are removed from your paycheck and the more taxes will be due on your tax return.

Technically, you can claim “two” for yourself if no one else can claim you and you are working. However, you may find that you actually owe at the end of the year. If you claim only “one” a tax refund usually occurs. Some people even claim “zero” to ensure a large tax refund is received annually. For more on the form W-4 allowance worksheet, please see the details below:

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