The Estimated Tax Deadline is June 15 – Are You Ready?
Business owners: A friendly reminder that your quarterly estimated tax deadline is June 15! If you earn income that requires you to estimate and pay taxes, you must file and pay by then to avoid IRS penalties and late fees. (Psst: The next quarterly due date for estimated taxes falls on September 15.)
Who Has to Estimate and Pay Tax?
If you have taxes withheld by your employer (as your sole source of income), sit back and relax — you’re not required to pay estimated tax. Your employer is required to withhold and pay the appropriate amount of tax throughout the year. However, if you owe tax of $1,000 or greater from any of the following sources on a quarterly basis, June 15 is your day:
- Self-employed or contract worker
- S-corp shareholder
- Sole proprietor
Additionally, corporation owners who expect to owe more than $500 are required to meet the quarterly due date.
What to Do When You Owe Estimated Tax
If you don’t automatically have tax withheld from your earnings, first calculate (or estimate) your taxes based on your total quarterly earnings. Once you determine that amount, file the proper form and pay the total due. Depending on your business type, file one of these two forms:
- Corporation filers should use Form 1120-W, Estimated Tax for Corporations
- Form 1040-ES should be used by self-employed persons, S corporation shareholders, partners, and sole proprietors
Instructions on how to pay estimated tax when using Form 1040-ES will be found on the form itself; payment methods include remitting by mail, phone or online. If you’re required to file Form 1120-W, you must make your payment by the Electronic Federal Tax Payment System.
What Happens If You Don’t Pay?
It’s not worth the risk to avoid filing and paying your quarterly tax. You may be subject to both penalties and interest on the total amount due, even if you forgot. Failure to pay, or underestimating/underpaying tax, can result in a penalty for tax liabilities of $1,000 or more.
The IRS may waive the penalty if you fell victim to an unusual circumstance (e.g. natural disaster) that prevented an on-time payment. Reasonable cause also applies to disabled individuals or those who retired during the estimate and payment period.
You can rack up interest quickly for any tax liability which is not estimated and paid by the June 15 deadline. The best way to avoid messy business tax liabilities and ugly fees is to get help from a business tax professional. Our team can help you file correctly, clean up tax debt issues, or see if your business type is the best one for ultimate tax savings. And when September rolls around, you can do it all over again with confidence.
Oh, and if you haven’t heard, the estimated tax deadline is June 15. 😉