When a business pays estimated corporate taxes, they must calculate the amount of taxes that they will have to pay over a certain period of time, then pay that amount throughout the year. Paying estimated taxes is beneficial for businesses because it prevents them from spending too much at one time while making the entire tax-paying process more manageable.
Sacramento businesses that are interested in getting help with their estimated taxes are encouraged to get in touch with the accountants at Cook CPA Group. When using the help of the experienced and professional accountants that work with Cook CPA Group, clients can feel secure in the knowledge that their estimated taxes are being paid with promptness and accuracy.
Paying Estimated Corporate Taxes in Sacramento, CA
Businesses can determine how much they can expect to pay in estimated corporate taxes by subtracting the tax credits they plan to take and the taxes they’re expecting to have withheld from the amount of taxes that they expect to pay over the entire year. If a sole proprietor, partner, or S corporation expects to owe a tax of at least $1,000, they will have to make estimated tax payments.
Income taxes are the biggest estimated tax paid by corporations in Sacramento. This tax is levied at a rate that is determined by the type of business that the corporation is classified as: S corporations have an income tax rate of 1.5% while C corporations that pay estimated taxes do so at a rate of 8.84% of their total income. Corporations, generally, will have to make estimated tax payments if they expect to pay taxes that exceed $500 when they file their return.
To figure out how much they owe in estimated taxes, sole proprietors, partners, and S corporation shareholders can use Form 1040-ES. Completing this form will require figuring out adjusted gross income, taxable income, deductions, and credits for the year for which taxes are being filed.
There are a few methods businesses can use to figure out how much they owe in estimated taxes, but there are two that are more common than the others. One popular method of figuring out how much is owed in estimated taxes is to simply pay 25% of the income tax that will be shown on the corporation’s return for the current year; this payment will be made quarterly.
Another common method used to figure out how much a business will pay in estimated taxes is to pay 25% of the income tax shown on the return filed by the corporation the previous year. To use this method, a Sacramento corporation must have filed their taxes in the previous year, the return must have been for 12 complete months, and the return must have displayed a positive tax liability.
When to Pay Estimated Corporate Taxes
The calendar for estimated tax payments is divided into four periods; payments are due on the 15th day of the fourth, sixth, ninth, and twelfth months of each year. If any of those dates fall on a weekend or holiday, the business may pay their installment on the following business day. Payment installments are officially due based on the quarterly schedule, but businesses may also elect to make payments based on a weekly, bi-weekly, or monthly schedule.
Businesses are able to file for extensions on their estimated tax payments using Form 7004. The application for an extension will be accepted if the form is completed and filed properly and the business pays any taxes due by the date listed on the return.
Sacramento businesses that would like to learn more about paying their estimated corporate taxes can use Publication 505, the guide to estimated taxes issued by the IRS, or contact a qualified accountant with the Cook CPA Group.
Penalties for Failure to Pay Estimated Corporate Taxes
If a business pays too much or too little in estimated taxes, they may be required to pay penalties. If estimated taxes are underpaid, a business will have to file Form 2220, which will help them calculate the penalty they owe. This penalty will be based on three factors: the amount by which they underpaid, the length of time that the underpayment lasted, and the interest rate for underpayment as determined by the IRS.
Businesses that overpay their estimated taxes by more than 10% (and by an amount greater than $500) will have to apply for a refund using Form 4466. This should be filed after the end of the corporation’s tax year but before an income tax return is filed.
Making Corporate Tax Deposits Electronically
Sacramento businesses that are paying estimated corporate taxes must use the Electronic Federal Tax Payment System (EFTPS), a free service provided by the Department of Treasury, to pay their estimated taxes, as well as federal tax deposits, deposits of employment, excise taxes, and corporate income taxes. A payroll service, tax professional, financial institution, or other qualified third party may make payment installments for a Sacramento business if they do not want to use the EFTPS.
Sacramento Accountant for Estimated Corporate Taxes
Mange, file, and pay your estimated corporate taxes with the help of an accountant from Cook CPA Group. Let our experienced, knowledgeable, and skilled accountants make the process of paying your estimated corporate taxes easier so you can focus on more important aspects of your business.