What are Quarterly Estimated Tax Payments: A Retailers Guide

If you’ve been in business for any length of time, you may have heard about quarterly estimated tax payments, and maybe even thought to yourself, “What are quarterly estimated tax payments? And do I need to pay them?”

If that sounds familiar, then keep reading! And if you’ve never heard of quarterly estimated tax payments (or more simply put, estimated taxes), then you DEFINITELY need to keep reading to see if this is something you should be doing yourself. 

Who Needs to Pay Estimated Taxes?

The short answer – if you expect to owe $1,000+ in personal income taxes when you file your annual income tax return before the April 15th deadline next year, you should be paying in quarterly estimated tax payments throughout THIS year to avoid interest & penalties on the total amount you owe when you file your annual return.

You know when you’re an employee of a business, and you have payroll taxes taken out of your paycheck? The IRS (and state government agencies, if applicable) like getting their money throughout the year, so that’s why they’ve implemented this type of “pay as you go” system for those of us that are self-employed. 

How Do I Know How Much to Pay?

There’s a couple different ways to determine how much you should be paying in quarterly estimated tax payments. 

The simplest way is to see if your tax preparer provided estimated tax vouchers as part of your last year tax return. If you worked with a tax preparer in the past, he/she should be able to help you with this.

If your finances are significantly different this year than last year, it might make more sense for you to calculate an estimated amount due each quarter. 

How do you do that?

Well…it starts with good bookkeeping!

To start, you need to see what you NET income is for the time period you’re paying for (see the next section for these time periods… it’s not as straightforward as you might think) Remember, your NET income is going to be your Gross Sales – COGS – Expenses, so it’s the BOTTOM line on your income statement.

Next, you’re going to take that Net Income and multiply it by your effective tax rate. This could be anywhere from 15-30%, based on your personal income tax bracket. Your prior year tax return should show you what this percentage is. 

Again, if you’re working with a bookkeeper or tax preparer, they should be able to help you out with this.

When Do I Need to Pay Quarterly Estimated Tax Payments?

The IRS likes their payments quarterly, so you’ll need to pay estimated taxes four times a year. But, of course, it’s the IRS, so nothing is ever as straight-forward as it should be, and the “quarterly” payments are not TRULY based on the calendar quarter. Here are the deadlines:

April 15th: For income earned from January 1 to March 31.

June 15th: For income earned from April 1 to May 31.

September 15th: For income earned from June 1 to August 31.

January 15th (next year): For income earned from September 1 to December 31.

It’s important to stay on top of these dates to avoid penalties. If you miss a deadline, the IRS may charge you a late payment penalty—so setting reminders is key!

How Do I Make Quarterly Estimated Tax Payments?

Making payments is actually super easy, and you have a few options:

Online: You can pay directly on the IRS website through their “Direct Pay” tool or use the Electronic Federal Tax Payment System.

By mail: If you prefer the traditional route, you can send a check along with your 1040-ES voucher provided in your prior year tax return.

Through your bank: Some banks offer services that allow you to set up automatic payments to the IRS.

Find whatever method works best for you—just make sure the payments get in on time!

I know it can feel like a lot to juggle, but with a little planning and organization, estimated tax payments don’t have to be a headache. Keep good bookkeeping records, set reminders for the due dates, and don’t hesitate to reach out if you need a hand. You’re doing amazing things with your boutique, and staying on top of your taxes is just another way to keep your business thriving!

Got questions? Don’t be afraid to ask—I’m here to help!

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