What Are Estimated Taxes and How Do I Pay Them

What is the most crucial for every business small business owner out there? In this episode, we discuss estimated taxes, where you’re a W2 employee, your taxes are calculated and paid by your employer, or as a business owner, it’s up to you to make sure you pay your own estimated taxes quarterly to cover federal and state agencies.This is because the US tax system is a pay-as-you-go system where taxes are owed on earnings as they are earned.What happens if you don’t pay enough in estimated taxes? When it comes time to file your year-end tax return, it’s simply a reconciliation of what was earned and what was paid throughout the year. If you don’t pay enough in estimated taxes, you’ll face potential penalties and interest. But don’t worry, understanding estimated taxes can help avoid big tax surprises for small business owners.Tune in now as Mike emphasizes the importance of staying on top of estimated tax payments to avoid penalties and underpayment! [00:01] Understanding Estimated TaxesWhat is the importance of estimated taxes for small business owners?The US tax system is pay-as-you-go, meaning you owe taxes as you earn moneyW2 employees have taxes withheld by employers, but business owners must pay estimated taxes on their ownEstimated taxes are paid quarterly to cover federal and state agencies[03:40] The Safe Harbor Method And Actual Method ExplainedYear-end tax return reconciles what you earned and what you paid in taxes, resulting in either a refund or the amount owedInterest and penalties may apply if you owe taxes at year-endThe IRS recognizes four quarters for estimated tax purposes, but they differ from the normal quarter systemThere are two methods for calculating estimated taxes:The Safe Harbor MethodThe Actual Method[18:13] Closing SegmentMike advises listeners to ensure that they stay on top of their estimated taxes and make sure that they’re avoiding interest and penalties when possible!Final WordsKey Quotes“By understanding estimated taxes, it can really avoid big tax surprises along with penalties, interest, and various things like that. So hopefully you walk away from today knowing what estimated taxes are, how you pay them, and how you calculate them.” – Mike Jesowshek, CPA--------Podcast Host: Mike Jesowshek, CPA - Founder and Host of Small Business Tax Savings PodcastJoin Our Tax Minimization Program: https://www.taxsavingspodcast.com/taxIncSight Packages: https://incsight.net/pricing/Book an Initial Consultation: https://app.simplymeet.me/o/incsight/sale-------Podcast Website: https://www.TaxSavingsPodcast.comFacebook Group: https://www.facebook.com/groups/taxsavings/--------To find out more on this topic and many others visit our website at www.TaxSavingsPodcast.com. You can also give us a call at 844-327-9272 or send your questions to us at: Ask@TaxSavingsPodcast.com