taxes
So you opened a business, I bet you didn’t realize how much you’d be stressing about taxes! Don’t worry I’ll break it all down for you here:
Why do I have to pay taxes?
Unlike employees who have taxes withheld from their paychecks, business owners are responsible for paying estimated quarterly taxes. And yes, it is required to be paying these taxes quarterly - failure to do so can result in penalties and interest. The one exception to this rule is if you expect to owe less than $1,000 in taxes for the year when your return is filed. So, it's more than likely you should be paying estimated quarterly taxes.
Paying taxes quarterly may seem annoying, but think of it like this - if you end up owing $5,000 for 2024 taxes would you rather pay the full $5,000 all at once or in four installments over the year? The amount broken out over the year seems way better! And if you end up overpaying you get a refund when your taxes are filled.
How do I know how much I owe?
Bookkeeping, bookkeeping, bookkeeping!!! Accurate record-keeping is essential for your business. Bookkeeping tracks income and expenses throughout the year and maintains organized records of all transactions, including invoices, receipts, and bank statements.
Tracking expenses allows you to reduce your taxable income - also known as tax deductions. Common deductions include:
Equipment and gear purchases (cameras, lenses, lighting equipment)
Travel expenses
Studio rental costs
Marketing and advertising expenses
Insurance premiums
Professional development and education
Your tax liability (how much you owe) each quarter is based on your business income and expenses for each tax period. If you don’t have a bookkeeper - you need to be doing the bookkeeping yourself. I recommend using an accounting software such as quickbooks or tracking it in a spreadsheet. Check out my DIY income and expense tracker on my website for easy to use, do it yourself record keeping.
Tax Deadlines
Estimated quarterly taxes are due on the following dates:
April 15th - payment period: January 1st - March 31st
June 15th - payment period: April 1st - May 31st
September 15th - payment period: June 1st – August 31st
January 15th (of the following year) - payment period: September 1st - December 31st
Conclusion
I’ll say it again for the people in the back, PAY YOUR TAXES. Not only is it the law, but paying taxes throughout the year can significantly ease the burden of a large payment when taxes are filed. By staying organized, taking advantage of deductions, and meeting your tax deadlines, you can ensure compliance with tax laws while maximizing your financial well-being. The easiest way to do this? Hire a bookkeeper! Let a professional handle your books for you so you can be confident your taxes are accurate and focus on what you do best.
P.S. Keep in mind quarterly estimated taxes are separate from sales tax. For more information on sales tax, check out my sales tax blog.
