The Bookkeeping Corner

Self-Employed Business Owners and Estimated Taxes

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Self-Employed Business Owners and Estimated Taxes

I’ve worked with a number of self-employed business owners who don’t realize how their tax liability can increase when they become a sole proprietor. Taxes for self employed individuals are not new and have been around a number of years.  It can save you a lot of stress at tax time if you understand how

As a sole proprietor, you are now responsible for paying self-employment taxes in addition to the taxes you would normally be liable for as an individual tax payer.  Self-employment taxes are really the social security and medicare taxes that an employer would pay for your benefit if you were an employee.  One you become your own employer, you are now responsible for paying the tax.

If you don’t make estimated tax payments throughout the year, you could be faced with a huge tax liability, interest and penalties at tax time.

How to pay taxes when you are self employed?

Estimated taxes are due April 15^th, June 15^th, September 15^th and January 15^th. Making estimated tax payments throughout the year helps to ease the tax burden and reduces penalties.

The IRS and some state agencies will enable you to pay your taxes online.

You can pay your federal estimated taxes electronically through the Electronic Federal Tax Payment System (EFTPS). EFTPS is a free service that allows taxpayers to pay their taxes electronically (www.eftps.com) 7 days a week, 24 hours a day.  With EFTPS, you can schedule your taxes to be deducted from your bank account on regular basis or one-time basis.  Scheduling your taxes to meet the quarterly deadlines will prevent you from forgetting the deadline.  In order to use EFTPS you’ll need to enroll, which can be done online.

Want to learn more about estimating your tax liability for 2010? Contact The Financial Boutique for a free consultation!