Atascadero Tax Accountant Releases ‘Why Quarterly Estimated Taxes are Important’
-Quarterly taxes are estimated taxes that are paid every three months by the self-employed, independent contractors, freelancers, corporations and other business entities, employees who are not having enough withheld, landlords and investors, and others with earnings from other than a paycheck. The requirement to pay quarterly taxes are often questioned by those who have to pay them with some choosing to just not pay until taxes are due in April and Robert Borish, CPA, the Atascadero tax accountant with North County Tax & Accounting recently released a report explaining the importance of paying quarterly taxes.
In the simplest terms:
- Quarterly taxes are installments on estimated tax liability for the tax year. To calculate estimated taxes, divide estimated tax liability or the year by four. When tax-time comes around, if the taxes due are less than what was paid there is no tax due and maybe even a refund. If quarterly taxes were underpaid, the balance is due.
- If federal quarterly taxes are not paid, you will owe a penalty in addition to the actual tax amount. The penalty is calculated differently for federal and for state. A penalty can also be levied if quarterly taxes are underpaid by a certain percentage or amount.
One downside for not paying quarterly taxes is that the penalties reduce business profit. Since one of the reasons for being in business is to generate profit, it doesn’t make sense to not pay quarterly taxes when they are due. Additionally, there is the danger that purposefully not filing and paying quarterly taxes from year to year can bring unwanted attention from the Internal Revenue Service (IRS) or the California Franchise Tax Board (FTB). Even though the business books are all in order and no tax fraud is actually taking place, why poke the tiger? Audits, even when the outcome is sterling, are expensive and time consuming.
Paying taxes over time also helps the business budget. It’s important to be able to predict expenditures and financial liabilities as much as possible to accurate forecast profit.
The wisest thing to do is pay the quarterly taxes. Working with an experienced accountant, such as the Atascadero tax accountants from North County Tax & Accounting makes sure:
- All questions are answered
- Whether or not quarterly taxes are due and the amount
- Understand your business’s tax obligations and can budget accordingly
- Gain a more accurate profit forecast
- Avoid costly penalties
The accounting firm provides payroll services, accounting and bookkeeping in addition to taxes. Cloud-based QuickBooks services also help small businesses with accurate accounting and payroll, releasing busy managers to focus on growing the business.