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Quarterly Tax Tip Sheet for Self-Employed Entrepreneurs

Self-employed Americans are falling behind on their quarterly taxes – and that means they are vulnerable to fines.

The Wall St. Journal reported in August that the IRS has found a 40 percent increase in the number of Americans who didn’t pay enough in estimated quarterly taxes, between 2010 and 2015. That can affect you and your contractors, tripping up cash flow if you must catch up with taxes owed and pay fines to boot (Remember: This is a guide only; we’re not pretending to be accountants!).

Here’s a summary of IRS resources for confirming what you are to pay and when:

  • Make sure that you’re including all the estimated taxes you probably owe: income, Social Security, Medicare and, potentially, other taxes, depending on your situation.
  • Review Publication 505, which outlines all kinds of special circumstances, to see if any apply to you.
  • If you’ve fallen behind, you can apply for a payment plan (as long as you owe less than $50,000 and did file returns, but just didn’t pay enough each time). You’ll need to apply as either an individual or a business. Get Form 9465 and check out the details here.

Finally, keep track of what you are paying quarterly so you are closely estimating your annual tax bill. When the dust settles at the end of the year, you’ll know for sure what you should have paid and what you did pay, based on what you actually earned. With consistent documentation of your quarterly payments, you’ll minimize accounting fees and the likelihood of giving the IRS a year-end bonus.

Joanne Cleaver is a widely published freelance business author, writer and former deputy business/real estate editor of the Milwaukee Journal Sentinel. She and her husband have renovated three historic homes.

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