Estimated Reading Time: 3 minutes
MSM Mondays is our biweekly series of accounting insights for businesses, designed with business owners in mind.
Q3 Estimated Tax Payments for June 1st through August 31st are due on Tuesday, September 15th… just a week away! Here’s what you, as a business owner, need to know about quarterly estimated tax payments for both yourself and your company.
Who Has To Pay Estimated Taxes?
Estimated Tax Payments are required for individuals whose income is not subject to withholding and expects to owe at least $1,000 in taxes for the tax year, after withholding and refundable credits. This typically includes business owners like sole proprietors, partners, and S corporation shareholders. They are also required for corporations expecting to owe at least $500.
Estimated Taxes For Partnerships
For partnerships, individual partners will need to report their shares on their own returns, and they may need to pay estimated taxes on those shares. Partnerships do not typically pay federal income taxes themselves.
Estimated Taxes for S-Corporations
For S corporation shareholders, they must report pass-through income and losses on their personal tax returns, which may require estimated tax payments. The S corporation itself may also owe estimated tax payments for certain entity-level taxes totaling $500 or more.
What Happens If You Don’t Pay Your Estimated Taxes?
If estimated taxes apply to you, but you neglect to pay them, the IRS may charge you with an estimated tax underpayment penalty. Even if you end up receiving a refund when you file your annual tax return, you would still be subject to this penalty if you neglect to pay your estimated taxes.
The underpayment is usually the difference between what you paid and what you owed for that estimated tax payment. The applicable underpayment rate, which is like interest on the estimated taxes that you haven’t paid, is typically the federal short-term rate plus an additional 3 percent. These rules are different from the regular failure-to-pay IRS penalty.
Need Help With Your Estimated Taxes?
Because of the potential consequences, it is extremely important to keep up with the estimated tax deadlines. However, they can get pretty complicated, depending on the nuances of your business and personal finances. Our team of experienced advisors can help you understand your tax obligations and plan ahead for upcoming payments.
Keep Up With MSM Mondays
New to the series? Catch up on our previous article about Office and Home Expense for Construction and Trades Businesses to learn about the special nuances of office and home expenses for the construction industry Be sure to follow us on social media so that you never miss an MSM Monday!
Disclaimer
Please note that the information shared in MSM Mondays is intended for general informational purposes only. It is not a comprehensive analysis of every situation, nor should it be considered a substitute for personalized accounting, tax, or legal advice. Because every business is unique, we encourage you to consult with a CPA regarding your specific circumstances. If you have questions or would like guidance tailored to your business, our team is always happy to help!
