Few things incite stress in just about everybody like taxes do. If you are a creative entrepreneur, consultant, or small business owner, it can feel even more overwhelming.
What deductions can I make? What are the forms I need to file? When is all of this *gestures vaguely* due? And how much do I owe the IRS? Trust us, everyone has the same questions – you are not alone!
In this article, we’ve rounded up the top five questions we repeatedly get to give you simple, straightforward answers. Whether you are a freelancer, sole proprietor, or S Corp owner, this guide will help ease your anxiety and reduce some of the stress and overwhelm that come with tax season.
Question 1: “Do I need to file quarterly taxes?”
Short answer: If you are self-employed or running an S Corporation, probably yes.
“Taxes must be paid as you earn or receive income during the year, either through withholding or estimated tax payments.” – IRS
While the deadline for filing your tax paperwork is in April, the IRS expects tax payments to be made throughout the year. For employees, the tax payable is deducted from their paychecks before they receive it (tax withholding). If you are self-employed or run an S Corporation, you are responsible for doing this on your own. When the amount of tax you expect to owe for that year is more than $1,000, the IRS expects you to make estimated tax payments every quarter.
How much should I pay in quarterly taxes?
How much you should pay in estimated quarterly taxes depends on the amount of income you generate less any deductions and credits. A general rule of thumb is to use your tax return from the previous year to make estimates. You can use Form 1040-ES to work out your estimated quarterly tax amount or check out our Estimated Tax Payment Worksheet, a free download to help you determine the amount to pay each quarter.
What are the deadlines?
Estimated Tax Payments are broken down into 4 quarters. The payments are spaced out throughout the year usually due on April, June, September, and January of the following year.
- Q1- For the period January 1- March 31- Due date: April 15
- Q2- For the period April 1- May 31- Due Date: June 15
- Q3- For the period June 1- August 31- Due Date: September 15
- Q4- For the period September 1- December 31- Due Date: January 15 of the following year
There are many ways to make estimated quarterly tax payments. The IRS offers options such as electronic payments online via the IRS website or the app, by phone, in cash, or by mailing in a check or money order. Keep in mind that making a late payment or underpaying your estimated quarterly taxes can result in a stiff penalty.
Need more information? Check out our full guide on making estimated tax payments: All About Estimated Tax Payments
Question 2: “Do I need to send 1099s to contractors?”
Short answer: If you paid someone $600 or more for services and they’re not an employee, chances are yes.
Form 1099-NEC is a record of nonemployee compensation i.e. payment for services by a person who is not an employee of your company. Some examples of this may include the freelancer who manages your social media accounts and the independent contractor who designed and built your website. Typically, this form is not required for goods or products purchased.
The minimum threshold to file Form 1099-NEC is $600. You must send each non-employee who has received payment of more than $600 for their services a 1099-NEC. You’re not required to issue them a 1099 if you paid them credit card, paypal, etc. It is then the merchant’s responsibility to issue them a 1099-K.
The deadline to file Form 1099-NEC with the IRS and send it to recipients is January 31. Failure to do so before this deadline may result in penalties.
Learn more about Form 1099 here: All About 1099’s And What You Should Know
Question 3: “What can I actually write off?”
Short answer: A lot, if you’re keeping track of your expenses and doing tax planning!
We all have to pay taxes but that doesn’t mean we should be paying more than we need to. A smart business move is taking advantage of tax deductions and writing off relevant expenses in your tax return. The important thing to remember is these deductions and write-offs need to be done during the year, not at the end.
Some common deductions solopreneurs and small business owners can write off include home office expenses, mileage, business meals, contractor payments, and tools and software you use to run your business. To figure out what counts as a valid business expense that can be written off, ensure that it meets the criteria of “ordinary” and “necessary” for your business to run smoothly.
Maximize your tax deductions and write-offs with the Self-employed Deductions Cheatsheet or the Ultimate Tax Deductions E-Book.
Want to reduce your tax bill even further in the upcoming year? This is the perfect moment to do some tax planning! By strategically evaluating financial decisions, taking advantage of tax breaks and credits, and reducing your tax liabilities, you may be able to save hundreds or even thousands in taxes.
Get ahead in 2025 with these 5 Tax Planning Tips for Small Businesses that will help you pay less in taxes.
Question 4: “Should I switch to an S Corp?”
Short answer: Not every business is ready for this move, but it can offer big tax savings when done at the right time!
Almost every business owner eventually asks themselves this question – and it’s a question worth discussing with your accountant at the right time. As with almost every other business, there are pros and cons to switching to an S Corporation.
Some of the advantages include possible tax savings, limited liability protection, and bypassing self-employment tax. Among the disadvantages, we can count additional compliance costs and accounting fees, increased paperwork, and payroll costs.
Depending on the size and revenue of your company (a good estimate is an annual profit of $50k or more), and your personal situation, it may be a logical choice to make the switch.
Curious to find out if it’s the right moment to file for an S Corp? Check out these resources for more information:
- Is an S Corporation Right for Your Business? Understanding the Tax Savings & Compliance Requirements
- Small Biz Guide: Everything You Need to Know About S-Corporations
- 10 Important Things You Need To Know About S Corps
Question 5: “How do I know if my bookkeeping is ‘good enough’ for taxes?”
Short answer: Keep track of your books and stay organized!
Solid bookkeeping is the foundation for any business. It not only saves you a headache when it’s time to file your taxes but can also save you money, reduce stress, and make for a more successful business. Thankfully, it doesn’t have to be too complicated.
If you are bootstrapping in your business, the bare minimum you need to ensure you have “good enough” books for your taxes is by doing your own bookkeeping with a spreadsheet or using basic accounting software. This is a simple way to keep track of income and expenses each month and can even show you where you need to tighten up your pursestrings in a pinch.
As your business grows, you may want to consider hiring a financial professional to help with your books and taxes. If you work with multiple contractors and vendors, have overheads and more deductions, or if you simply want to be more proactive in tax planning and managing your business finances well, working with a trained professional could save you time, energy, and in the long run, even money. They can also help you avoid triggering IRS Audit Red Flags by making sure everything is properly accounted for.
Ready to outsource your books and taxes? Here’s what to expect when you work with Exceptional Tax Services!
Bonus Question: “What’s my next step?”
Short answer: If you are tired of guessing your way through tax time, grab The CEO Blueprint: Finance, Accounting & Mindset Mini Course!
Taxes, finances, and bookkeeping are aspects of your business that cannot be overlooked. Get organized this tax season and make this your best year yet by building a business with confidence, clarity, and strategy. In this 3-Day Mini-Course, you will learn how to set up your business foundations for success, get financial clarity and guidance on taxes, and step into your power as CEO. Don’t let finances or fear hold you back. It’s time to take the leap and create the business (and life) you’ve been dreaming of. Get your free download of The CEO Blueprint: Finance, Accounting & Mindset Mini Course now!
