The American taxes are a pay as you go system. This means that taxes are to be paid throughout the year. Many employees do not realize this, because as an employee, your employer is withholding taxes from your pay check to continuously pay your taxes for you throughout the year.
However, if you are like many business owners and you enjoy being your own boss, you also must pay your quarterly tax estimates. It is important to understand the rules as they determine what you owe and which penalties may be assessed for not being paid on time.
Except if you’re tax exempt, most small business owners who operate their business as an LLC, an S Corp., a partnership, or sole proprietorship will need to file quarterly taxes. Keep in mind that tax law does have exemptions for every rule, so doing your homework or working with an accountant or bookkeeper can help to determine if you fall under that exception.
Another option when filing joint tax returns is, you may have the ability to use withholdings from a spouse’s job to avoid owing estimated taxes or worse, receiving a penalty. This is possible due to how taxes are collected from your spouse’s employer. Because taxes are continuously collected throughout the year, it eliminates the need to pay quarterly tax estimates. If you have planned to have enough sufficiently taken out of your spouse’s income you may be able to avoid the necessity to pay quarterly tax estimates.
In any scenario, if you are unsure on whether you need to be paying quarterly taxes, or if you are ok to just pay your taxes year end, contact your accountant or bookkeeper. They will be able to help you along the way making sure to avoid any penalties or late fees that can be received. While paying taxes can be a hassle, doing it the right way can help to keep you on the road to success.