WASHINGTON (AP) – Tuesday, April 18, is more than just the deadline for small-business owners to file their tax returns or get extensions and pay their 2016 tax bills. It's also the day they must make their first estimated tax payments for 2017.
Estimated payments are made quarterly, in April, June, September, and in January of the following year. They're required whether a company is a corporation or owned by a sole proprietor or partners. The government doesn't want to wait for its money. It can penalize taxpayers who don't pay their estimated taxes on time.
But it also makes good sense for business owners to pay taxes as they go along through the year. Savvy owners will sock away money each week, or each month, to be sure they have enough money to pay their taxes quarterly. Those who don't can find themselves scrambling during filing season and paying extra.
The IRS has formulas for computing estimated payments. Sole proprietors and partners must use IRS Form 1040-ES, Estimated Tax for Individuals, and corporations must use Form 1120-W, Estimated Tax for Corporations, to do the computations and file with the government. If you use tax preparation software, the program will do the math for you.
The smartest way to avoid a penalty is to estimate each quarter what your tax liability will be for the year. Penalties themselves require separate forms to be filed with your tax return — Form 2210, Underpayment of Estimated Tax by Individuals, Estates and Trusts, or Form 2220, Underpayment of Estimated Tax by Corporations.
You can get more information about estimated payments on the IRS website here: http://bit.ly/25yubTd
– by AP Reporter Joyce M. Rosenberg
