Estimated tax payments

# Estimated tax payments

If you expect to owe tax on business income that has no withholding, you pay estimated tax during the year. For a sole proprietor, these payments cover your personal income tax and self-employment tax.

Due dates

For an individual, the usual due dates for calendar-year filers are April 15, June 15, September 15 and January 15 of the next year. If a date falls on a weekend or holiday, it moves to the next business day. Check Form 1040-ES on irs.gov for the current year. Corporations have their own schedule.

Recording a payment

1. Pay from the business bank account, or record the payment when it leaves the bank.
2. Use an equity account for owner draws rather than an expense account. Create one in the chart of accounts if you do not have it.
3. Record the date, the amount and the bank account. Match it on the bank review once the bank import is in.
4. Keep the payment confirmation from the IRS or your bank with your records.

Why it doesn't count as an expense

Estimated tax is a prepayment of your own income tax. It doesn't count as a cost of running the business. Recording it as an expense would understate profit and would change the tax-line totals. For a sole proprietor or partner, it is an owner draw.

For a C corporation, the payment is tax on the company's own income, and it is recorded differently. Ask your accountant which account to use.

Things to check

• Whether you owe a penalty for underpayment. This depends on safe harbour rules, so ask your accountant.
• The payments made in the year, against the amount on your return.

Pop Books does not calculate or pay estimated tax for you yet.