There are two types of quarterly taxes, those for individuals and the required 941 quarterly taxes a business with employees must report. Jean Scheid explains how to file quarterly taxes in both these situations.
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The Two Types of Quarterly Taxes
The two types of quarterly taxes that need to be filed with the Internal Revenue Service (IRS) consist of:
Individuals – The IRS requires that individuals estimate and file quarterly taxes if they fall into one of the following categories:
You expect to owe the IRS an amount over $1,000 in any given year.
Businesses – If you employ people and withhold required deductions from their earnings, you are required to make timely 941 tax deposits and file a 941 quarterly wage report. Every business that withholds federal, social security and Medicare taxes must file a quarterly wage report with the IRS.
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How to File Individual Quarterly Taxes
If you are self employed or expect to pay the IRS over $1,000 in any given year, you are required to file and pay quarterly taxes to the IRS based on estimated income. In past years, the IRS has become more online user friendly and almost every form and instructions are available on their website.
For individuals, you will need to download and print a 1040ES form with instructions. Once you calculate your estimated quarterly taxes, your payments are due with the provided IRS coupon on April, June, and September 15 with your final payment due by January 15 of the following year.
To determine how much you must pay each quarter, follow the directions on Form 1040ES to figure out how much your adjusted gross income is expected to be. From there, the form offers tax rate schedules based on your adjusted gross income. When completing this form, you will be asked to answer certain questions to determine your quarterly tax and are allowed deductions for earned income credits and dependent credits. If you are self-employed, form 1040ES has a calculation for that as well based on expected earnings.
Once you’ve completed the form, complete the provided 1040ES coupon and remit the coupon along with your payment to the IRS. The 1040ES instruction booklet also provides the correct IRS mailing address based on where you live in the US.
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How to File Business 941 Quarterly Taxes
In order for a business to file quarterly taxes, you will need to download and print both the 941 Form and the 941 Instructions. According to the IRS, a business who pays wages must file Form 941 if:
You paid wages
Your employees received tips
If you withheld federal, social security or Medicare taxes
Once you download the form and instructions, you first step will be to report all wages paid in that quarter. Next you will need to report how much federal income tax was withheld during the quarter. Finally, you will need to determine how much social security and Medicare taxes were withheld along with the employer’s contribution. As an employer, when you withhold Medicare and social security tax, you are required to match both taxes and include them in your 941 tax deposits made at your bank.
Along with the basics mentioned above, you may also need to gather earned income credit information and COBRA credit information to include on the 941 quarterly wage report.
Once you’ve determined the amount of quarterly tax due, match that with the 941 deposits you made at your bank after each pay period. If you’ve calculated your 941 tax deposits correctly, you should owe nothing to the IRS, but will still need to send in the report showing the amount of the deposits you made within the quarter. Once your business is established, the IRS will send you pre-printed 941 quarterly tax reports. Forms are due to the IRS on the last day of the month following the reporting quarter. For example, quarter one comprised of January through March is due on April 30th.
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Failure to Pay Quarterly Taxes
The IRS does require certain individuals and businesses to file quarterly taxes. Failure to file may result in interest and penalties along with interest and penalties atop interest and penalties that continue to accrue until taxes are paid. If you need to know how to file quarterly taxes, especially if you are an individual, call the IRS or ask your tax professional for assistance. Finally, if the state you live in requires quarterly tax payments, you must follow a similar procedure.
A final tip on how to file quarterly taxes: If you are unsure how to do it, whether it's with your state or IRS, considering calling both agencies for free before you hire someone to do it for you.