Whether you’re building your nurse practitioner niche practice or developing another income stream, there’s something you need to be doing to avoid paying unnecessary penalties and interest: MAKE YOUR QUARTERLY ESTIMATED TAX PAYMENTS!
Remember that the IRS expects to be paid throughout the year. They don’t want to wait until the following year when you file your income tax return to collect one lump sum of what they are owed.
For people with regular jobs, this process happens automatically. Taxes are taken out of each paycheck and sent over to the IRS, so the process is seamless and you don’t even need to think about it.
However, people who own their own businesses or who have side hustles won’t have this luxury. No one is holding back a portion of their earnings or taking care of their affairs with the IRS. Therefore, handling these self-employment taxes is another responsibility that they must plan for.
Fortunately, it’s not as complicated to pay your ES taxes as some people might lead you to believe. ES stands for “estimated”, meaning they don’t have to necessarily be exact. The IRS publishes worksheets that you can use to estimate how much you owe, and as long as you get within the ballpark, you’ll be alright.
Typically, quarterly self-employment income is due on the following:
- April 15
- June 15
- September 15
- January 15 of the next year
Payments can easily be made online or by mailing in a check. If you owe state and city taxes, don’t forget to make ES payments to these other levels of government too.
WHAT IF YOU DON’T MAKE THESE ES TAX PAYMENTS?
Less money for your pocket …
If you miss one of the due dates, the IRS will typically penalize you 0.5 percent of the entire amount you owe. This will then increase for each partial or full month you don’t pay the tax in full, up to 25 percent. On top of that, you’ll also start accruing interest for the missed payment and interest charges.
Although rules vary from state to state, sometimes these penalties can be even more severe. The best approach is NOT TO TAKE YOUR CHANCES and let the money slip away from your pockets unnecessarily.
Yes, it’s no fun to pay these ES taxes. Depending on how much you’re earning, these payments might be thousands or even tens of thousands of dollars per quarter.
But this is all part of owning a business. In order to be in charge, you have to demonstrate your capacity for responsibility. And whether that means paying taxes, keeping track of the books, or any of the other “not fun” busy stuff, then so be it.
The sooner you EMBRACE this notion, the easier it will get. And believe me – once you MAKE IT A HABIT to set aside money for these ES taxes and regularly pay them, the better off you’ll be.
Talk to your accountant and ensure that this is being done appropriately in your business! There are varying rules on ES taxes and your CPA should be able to assist you with this.
