One of the most confusing taxes you’re likely to encounter started out as a favor to small business owners from the IRS: quarterly taxes.
Filing late is something that worries many taxpayers, and it’s especially difficult when you don’t have a reliable paycheck because you’re self-employed. To fix this, the IRS allows people to pay quarterly taxes on their estimated annual income. Instead of a giant chunk of money on April 15th, you’ll pay up in smaller dollops every few months.
The basic procedure for your quarterly taxes filing is simple. Read IRS Publication 505 for details on how to calculate the taxes you owe. The standard formula is just dividing your last year’s taxes by four. You’ll pay using IRS Form 1040-ES. By spreading out the payments, the IRS wants to make sure you always write a check for a manageable amount.
However, that doesn’t mean people don’t find themselves behind. With the IRS quarterly taxes, filing late can feel like a serious problem. Especially for people busy making their own money by running their own business, the extra paperwork and worry can sometimes be overwhelming. So it’s no surprise that people are often late.
There are two ways you can owe the IRS quarterly taxes.
Filing late the same year that you owe the taxes is not much of a problem. You’ll owe interest on the amount you don’t pay, and that interest won’t be deductible. But beyond that, if you pay the IRS quarterly taxes, filing late by a few weeks, or even a few months, won’t be a big deal. As of the First Quarter of 2009, that interest rate is just 5%.
If you owe for more than that length of time, you may need extra assistance. The good news? The quarterly payment option is not a special kind of tax — it’s just a way to pay the same kinds of taxes most people pay one a year, but in smaller pieces. So of it’s been more than a year since you paid the IRS quarterly taxes, filing late is quite similar to the standard late-filing procedure for regular income taxes.
Tags: IRS Quarterly Taxes
