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3 Replies Last post: Mar 22, 2008 4:53 PM by cognitive77

Quarterly estimated tax payments.

Mar 22, 2008 1:31 AM

cognitive77 11 posts since
Oct 17, 2007

My accountant has mentioned to me that we will probably be requird to make quarterly income tax payments based off of the previous years income. Our company only has 3 employees and does seasonal work. Point being, we're only in our second year of being a business and already pay out workers comp insurance ahead of time, and I also would like to make interest on the money WE earned...not the government.

Are these estimated payments mandatory? I don't have any problems saving the money, or budgeting. The IRS will get their money, I just don't want to give it to them ahead of time.

Any thoughts?

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LUCKIEST 7,942 posts since
Aug 6, 2007

1. Re: Quarterly estimated tax payments. Mar 22, 2008 6:33 AM

Quarterly estimated tax payments. It is great that you have an Accountant.
You did not say if you are a Sole Prop or a Corp.

No penalty
for failure to pay estimated tax will apply to an individual whose tax
liability for the year, after credit for withheld tax, is less than
$500 for tax years beginning before January 1, 1998. For tax years
beginning after 1997, the amount increases to $1,000.

+C-Corporations: +Corporations
are a separate, taxable entity and as such are required to make
estimated tax payments.
If the corporation anticipates a tax bill of
$500 or more, it must estimate it’s income tax liability for the
current year and pay four quarterly estimated tax payments.

Form 2210
“Underpayment of Estimated tax by Individuals, Estates, and Trusts” can
be filed if you meet certain exemptions from the penalty. The IRS is
authorized to waive the penalty for underpayment of estimated tax if
the underpayment is either due to casualty, disaster, or other unusual
circumstances and the imposition of the penalty would be against equity
and good conscience.
Good luck, LUCKIEST

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Lighthouse24 2,396 posts since
Oct 10, 2007

2. Re: Quarterly estimated tax payments. Mar 22, 2008 11:48 AM

I think almost every business (regardless of size/structure) that pays $500 or more in income taxes in one year is then required to make estimated tax payments on a quarterly basis (the IRS sends a package with computerized forms for the quarterly payments). However, as Luckiest noted, if your tax liability would be less than $1,000 for the year, you can hold off and pay it all in the last quarter without penalty (probably doesn't apply to you).

Like you, I would prefer to make interest on all the money I earn -- but I guess from the government's perspective, that portion of the money I earn belongs to them as soon as I earn it. So in that light, they're actually getting it three months late instead of a year ahead. (Sort of makes me feel a little better . . .)

Best wishes.

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cognitive77 11 posts since
Oct 17, 2007

3. Re: Quarterly estimated tax payments. Mar 22, 2008 4:53 PM

We're set up as an S Corp. I was able to find this on the IRS website last night.

9.1 Estimated Tax: Businesses
Is an S-Corporation required to pay quarterly estimated tax?

Rarely does an S-Corporation make estimated tax payments. On rare occasions the following taxes may have estimated consequences if the total of these taxes is more than an amount specified by law:

1. the tax on certain capital gains;
2. the tax on built-in gains;
3. the excess net passive income tax, and
4. the investment credit recapture tax.

My point being, we typically only work in the Spring and Fall. I have enough capital for our payroll, health insurance and other misc expenses, but I don't nearly have enough to pay out approx. $22,000 each quarter!

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Quarterly estimated tax payments.

Mar 22, 2008 1:31 AM

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