One of the last things you thought you’d be doing all the time when you started a business is figuring out taxes. You knew there would be paperwork and financial equations to solve, sure, but you never figured they would eat up half your life. It seems like that’s all you do anymore is pay some government entity for something.
Making things worse, it always seems like you’re behind as another payment is coming around the corner. Between April taxes, sales tax, and quarterly estimated taxes, you’re left standing scratching your head at what to tackle next.
Well we’re here to help with one of these – the quarterly estimated taxes. If you’re new to crafting, business owning, or taxes in general, we’ll cover the basics and tell you how to get started on them.
What Are Quarterly Estimated Taxes?
Remember the wage or salary job you quit to become a full time crafter? When you started that job you filled out forms to let your employer know how much of your earnings to send to the government to pay for taxes, Social Security, etc.. You claimed yourself and your loved ones and at the end of every pay period a percentage would come out and go to Uncle Sam.
You’ve probably noticed by now it doesn’t work that way as an independent craft seller. There’s no employer above you sending in money for you, nor do taxes automatically come out of the money you make from customers. Since the United States is a “pay-as-you-go” tax system, it’s up to you send periodic tax payments in.
That’s why every few months you’re forced to figure out how much you owe to the government based on how much money you made with your business. Luckily the payments are split up into quarters so the financial hit isn’t too great. Check out Outright’s Online Sellers Guide to Taxes for more about calculating your quarterly estimated tax payments.
Why Quarterly Estimated Taxes are Not So Bad
How can there be anything good about constantly worrying about your finances? Actually, QETs aren’t as bad as they seem, and can actually help you in a few ways. The main problem is many business owners and crafters forget to set aside money for payments and start to feel the pinch.
We, of course, recommend that you sign up for an account at Outright so we can organize all your financials for you. After you load your financial info (bank accounts, credit cards, PayPal, etc.) you’ll instantly have an idea how much you made over the taxable year. If you’d rather do it by hand, collect all your invoices together so you can add them up.
Now, here’s where it benefits you – once you have your organizational system in place, keep it up! Don’t slip back into stuffing invoices into a box beside your desk. Do your best to store papers where they belong or maintain your account at Outright to keep an accurate view of your business.
As for sending in the payment, we recommend signing up for the Electronic Federal Tax Payment System, or EFTPS. It’s a quick and easy way to get the tax money you owe to the IRS so you can get on with making more products and talking to customers.
This not only helps with your taxes; it can also aid you with your crafting business as a whole. Now you can get a better idea how your business is doing and can make adjustments accordingly. For example, you may notice after research where all your sales are coming from California and can adjust your marketing accordingly (tip – Outright can help you with this too!).
Do you have any questions about calculating quarterly estimated taxes? Let us know in the comments and we’d be happy to help!
This guest post is brought to you by Outright.com, the alternative to Mint for business. Sign up for Outright Plus today for a less taxing quarterly estimated tax time!