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What quarterly tax payments does my business need to make?

The quarterly payments your business needs to make depend on your structure, whether you have employees, and what taxes apply to your operations. Here are the main ones to know about.

Federal estimated income taxes are the big one for most small business owners. If you’re a sole proprietor, partner, or S-corp shareholder and expect to owe $1,000 or more when you file, you should be making quarterly payments. Due dates are April 15, June 15, September 15, and January 15 of the following year. Miss these and you’ll face underpayment penalties.

Self-employment tax catches many business owners off guard. If you’re a sole proprietor or partner, you owe 15.3% of net earnings to cover Social Security and Medicare. This gets paid through the same estimated payment process as your income tax, but it’s on top of whatever income tax you owe.

Arkansas requires quarterly estimated payments if you expect to owe more than $1,000 in state income tax. The due dates follow the federal schedule. The state charges interest on underpayments just like the IRS does.

If you have employees, payroll tax deposits are another obligation. You’ll need to deposit federal income tax withholding plus Social Security and Medicare taxes. Your deposit schedule depends on your total liability. Smaller employers typically deposit quarterly while larger ones deposit more frequently. Working with a bookkeeper for small business helps ensure these deposits happen on time.

Sales tax filing frequency varies. Arkansas assigns businesses to monthly, quarterly, or annual schedules based on how much tax they collect. Check your sales tax permit to see which schedule applies to you.

The safest way to calculate estimated payments is the “safe harbor” method. Pay 100% of last year’s total tax liability divided into four equal payments. If your adjusted gross income was over $150,000, bump that to 110%. This protects you from underpayment penalties even if your actual tax ends up higher.

If you’re in your first year or your income fluctuates, you’ll need to estimate based on current year numbers. Accurate monthly bookkeeping throughout the year makes this much easier because you can see your actual profit and project what you’ll owe.

Missing quarterly payments adds up fast. The IRS currently charges around 8% annually on underpayments, and that interest starts immediately. Setting aside money for taxes as you earn it and paying on schedule saves you money and stress at year end.

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Oliver Bookkeeping Solutions offers monthly bookkeeping, payroll, and accounting services to small businesses in Benton County and across Northwest Arkansas.

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