When you think about tax time, you probably think about the whirlwind of tax forms that occurs between January 1 and April 15. But, in actuality, tax time comes four times a year.
The United States tax system is “pay as you go,” meaning you pay income taxes as you recieve income rather than all at once at the end of the year. These tax payments are broken up into four installments that occur once every three months called quarterly estimated tax payments. And if you expect to owe more than $1,000 in taxes at the end of the year, you need to make these payments.
But don’t worry. More than likely, you’ve been making these quarterly payments all along and just didn’t realize it. If you work for an employer and submit a W-4 form, your employer calculates your quarterly tax payments for you and automatically withholds them from your paycheck. However, for small business owners, the responsibility of calculating and paying quarterly estimated payments falls on you. And it all starts with determining how much you’ll owe in taxes by the end of the year.