Hi All, I just started my business in December so i am as new as they come. I have been reading books non-stop and am currently learning about taxes. My question, is my business required to pay a quarterly estimated tax (1040-ES)? My business is: -A SMLLC -Located in NY -Online Electronics retailer. -Estimated $24,000 annual revenue. Any help is appreciated!
It depends on how much profit your business makes. You are required to have 90% of your tax obligation either withheld from a paycheck or paid in estimated taxes. If you make a profit that exceeds your expenses and you expect to owe taxes of $1,000 or more, then you may need to make quarterly estimated tax payments. Not all businesses make them, at least initially until the business really gets established.
It depends on how much profit your business makes. You are required to have 90% of your tax obligation either withheld from a paycheck or paid in estimated taxes. If you make a profit that exceeds your expenses and you expect to owe taxes of $1,000 or more, then you may need to make quarterly estimated tax payments. Not all businesses make them, at least initially until the business really gets established.
Hi,
Thanks for your response! I project making less than $50,000 in taxable income, let’s say $20,000 per year so my rate should be 15% if I’m not mistaking. So I should be taxed $3,000 annually. That means I should make a $750.00 payment on a quarterly basis? Am I getting this correct?
Hi,Thanks for your response! I project making less than $50,000 in taxable income, let’s say $20,000 per year so my rate should be 15% if I’m not mistaking. So I should be taxed $3,000 annually. That means I should make a $750.00 payment on a quarterly basis? Am I getting this correct?
Exactly right. However, you will surely have expenses that will lower the income, such as web hosting costs and cost of products. Therefore, you can compute recurring expenses and deduct them from your anticipated income to arrive at a lower figure on which you will actually be taxed.
Exactly right. However, you will surely have expenses that will lower the income, such as web hosting costs and cost of products. Therefore, you can compute recurring expenses and deduct them from your anticipated income to arrive at a lower figure on which you will actually be taxed.
Until your business is established and generates consistent net income, I recommend that you not pay quarterly tax payments because it is too difficult to predict annual taxable net income early in the tax year without a track record; however to avoid penalty fees, you should estimate your taxable income in the final month of the tax year and make a tax payment before year end so that you have paid at least 90% of your tax obligation. After a few years in business, you will be able to better project taxable income and at that point you should make estimated quarterly payments.
Until your business is established and generates consistent net income, I recommend that you not pay quarterly tax payments because it is too difficult to predict annual taxable net income early in the tax year without a track record; however to avoid penalty fees, you should estimate your taxable income in the final month of the tax year and make a tax payment before year end so that you have paid at least 90% of your tax obligation. After a few years in business, you will be able to better project taxable income and at that point you should make estimated quarterly payments.
What is the penalty if you chose to pay annually rather than estimate
quarterly? Flat rate or a percentage?
What is the penalty if you chose to pay annually rather than estimate quarterly? Flat rate or a percentage?
There shouldn't be a penalty for paying once a year if you do it before the
year ends (up to December 31). The IRS doesn't know in which quarter/quarters
you earned your income. You could have a seasonal business in which most of
your sales occur near the end of the year. The important thing is that you
make at least one estimated tax payment if you anticipate owing $1,000 or
more beyond what you may have withheld from another job.
It depends on how much profit your business makes. You are required to have 90% of your tax obligation either withheld from a paycheck or paid in estimated taxes. If you make a profit that exceeds your expenses and you expect to owe taxes of $1,000 or more, then you may need to make quarterly estimated tax payments. Not all businesses make them, at least initially until the business really gets established.
thankss for posting this question and for the above reply helped me out on my search
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BizResearcher | Window Shopper | 2/21/2012 - 1:19 pm
JerryAAA | Window Shopper | 2/21/2012 - 9:52 pm
BizResearcher | Window Shopper | 2/22/2012 - 12:23 pm
CrestCapital | Creator | 2/24/2012 - 8:44 am
julialilly | Window Shopper | 5/1/2013 - 12:48 pm
quarterly? Flat rate or a percentage?
BizResearcher | Window Shopper | 5/1/2013 - 2:42 pm
year ends (up to December 31). The IRS doesn't know in which quarter/quarters
you earned your income. You could have a seasonal business in which most of
your sales occur near the end of the year. The important thing is that you
make at least one estimated tax payment if you anticipate owing $1,000 or
more beyond what you may have withheld from another job.
liquidice | Window Shopper | 2/21/2012 - 1:43 pm
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