Ahhh yes the question of the hour…”how do I pay quarterly TAXES as a business owner?”
Before you jump into hiring or bringing on clients it’s important to have a complete understanding of all the things that need to be in place, especially when it comes to finance. Learning the right and wrong way to run a business takes a lot of trial and error but it also takes knowing when to ask for help and leaning on the right people to guide you! When Lynzee first launched LEO + LAINE, she knew she had a good handle on the creative side of things but when it came to understanding money, payroll + taxes, there was a lot of uncertainty. Her first step was reaching out to an accountant to better understand the forms and documents she needed to be filling out. She also met with a financial advisor to help her know exactly what she should be paying in taxes, when the payments needed to be made, how much to save and how to calculate everything.
Here’s a freebie cheat sheet that our team uses to calculate their quarterly taxes! You can thank us later.
= NET INCOME (You will use this for all calculations below)
Take your NET income X .0425 (for State of Michigan) = ____________
That will be what you owe for state (do this Quarterly)
NOTE: Quarters are weird -- see below for schedule and due dates
April 15 – for January, February and March
June 15 – for April and May
September 15 – for June, July and August
January 15 of the following year – for September, October, November and December
Take the SUM of (NET income X 0.9235) X 0.153 = ____________
>> This formula will never change
Take your NET income X your tax bracket percentage (helpful article linked for how to find your bracket) >> it will likely be 12% or 22% based on how much you claim as taxable income. So....
NET income X 12% = __________ -or- NET income X 22% = __________
Add your outcomes from STEP 1 and STEP 2 together.
THIS NUMBER is what you will owe (quarterly) in federal taxes. *Always round UP to CYA
Hope you found this helpful! Listen in to this week’s Formally Informal episode as we answer more questions in a rapid fire setting touching on all topics ranging from favorite coffee orders to quarterly taxes, entrepreneurship + how they all got started in the marketing industry. Click here to watch and subscribe!