How to Record Estimated Tax Payments in QuickBooks?

As a small business owner, it is of utmost importance to make estimated tax payments. This solves most of your […]

As a small business owner, it is of utmost importance to make estimated tax payments. This solves most of your business complications and also relieves you from undue pressure. Although there are ways to record the estimated tax payments in QuickBooks and track them, In today’s article we will highlight the exact process to do it successfully.

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Registering entries is quite easy when everything can be done with just one click in QuickBooks. Not to mention, it offers you a host of benefits too. Registering Tax Payments in QuickBooks also aids to monitor your inventory or the invoices, it also helps to manage the taxes too.

What is the Meaning of Estimated Tax Payments in QuickBooks in Simple Terms?

If you do not work for any company or are self-employed, you are required to pay your taxes four times every year as estimated payments instead of one big amount as payment. Now, since the calculation is about the amount of money to be made this year and paying the relevant taxes on it, it is termed the estimated tax that includes self-employment tax, income tax, or any other relevant taxes.

What are Estimated Quarterly Taxes in QuickBooks?

The United States has a “pay as you go” tax system. This means that you must pay taxes when you get them, rather than at the end of the year. However, you are not required to pay taxes every time you get money. Instead, you can pay your taxes in quarterly installments.

According to the IRS, “If the amount of income tax withheld from your salary or pension is insufficient, or if you receive income such as interest, dividends, alimony, self-employment income, capital gains, prizes, and awards, you may be required to make estimated tax payments.” Estimated tax is utilized to pay not only income tax but also additional taxes such as self-employment tax and alternative minimum tax.

Penalties for Non-Payment or Late Payment in QuickBooks

Individuals and corporations who fail to file quarterly taxes when required by the IRS may face penalties. According to the IRS, “We calculate the penalty separately for each required installment.” The number of days late is first computed, and then multiplied by the effective interest rate for the installment period. The IRS typically imposes a monthly fee of 0.5%.

Penalties of up to 6% may apply if you underpay your estimated taxes, therefore independent contractors and businesses should make sure they pay their projected quarterly taxes appropriately.

How to Estimate Your Quarterly Taxes in QuickBooks

You pay the federal income taxes on a pay-as-you-go basis. It is your responsibility to pay estimated taxes four times a year – on April 15, June 15, September 15, and January 15 of the following year – to cover your anticipated tax bill.

Underpayment of taxes results in a penalty, but overpayment is the equivalent of giving the government an interest-free loan that cannot be repaid until you file your return. Fortunately, the IRS publishes forms to assist you in correctly calculating quarterly taxes. QuickBooks Self-Employed can also help you manage your deductions and compute quarterly tax payments.

How to Categorize an Estimated Tax Payment on QuickBooks

These tax payments are personal in nature; they are not a corporate expense. Considering it by using the Owner’s Draw or the Equity account. With the following steps, you should be able to categorize your expected tax payments.

  • Navigate to the Accounting tab, then Chart of Accounts.
  • Tap the New button. Select Equity as your Account Type and Estimated Taxes from the Detail Type drop-down menu.
  • Enter your account information.
  • Save and Exit.

How to Record and Track Estimated Tax Payments in QuickBooks?

Here are the steps to record as well as track estimated tax payments in QuickBooks:

Step 1: First, You need to Create an Equity Account to Record the Particular Tax Payments.

Step 2: Now press the Chart of Accounts tab. You can gain access to this Particular Tab by Pressing the Ctrl + A Button.

Step 3: After you Enter the Tab, You will require to Create a New Account. If you Fail to Find to Create a New Account, then Just Press the Shortcut Ctrl + N.

Step 4: Allocate the Account to the Equity Account from the Given Types List.

How to Create Other Expense Accounts?

In case you do not want to create a new equity account then you can just register your entries in the Other Expense account. In order to do so, you need to make an account and then monitor the taxes. Such an account is very useful to run a sole proprietorship business.

Here are the steps to create the Other Expense Account in Your QuickBooks Company File:

Step 1: Press on the Settings tab. It is also known as the Gear Icon. You can Locate it on the Navigation Bar Top in the given Software.

Step 2: In the given Drop-down Button that will be Displayed, Press the Chart of Accounts Tab.

Step 3: From the Screen that Comes up, Press the New Tab, and the New Account will be formed.

Step 4: To Allocate What kind of that Particular Account It is, Press on Other Expenses, and then Your New Account will be Allocated as the Other Expenses Account.

How to Record Estimated Tax Payments in QuickBooks Self-Employed?

QuickBooks Self-Employed helps in monitoring business concerning transactions. It can also provide quarterly estimated tax payments. After the payments are made, a user can file for their concerning Schedule C together with the annual tax return.

In order to register estimated tax payments, it is always advised you first sign up for the QuickBooks Self-Employed account.

There are top two ways to record the Estimated Tax Payments in QuickBooks Self-Employed, as given below:

1st Method:

Step 1: On the Left Side of the Menu Bar, Navigate to the Section for Taxes.

Step 2: Fix the Right Year and Choose the Quarterly Tab.

Step 3: Select the Quarter that You want to Set the Tax Payment for.

Step 4: Now Press on the option that Says, Find the Estimated Tax Payments Near the option that Says, Don’t see Your Payment?.

2nd Method:

Step 1: Navigate to the Transactions Tab to Authenticate the Business Spending Transaction.

Step 2: Now, Allocate the Category Manually from the option Taxes and Licenses to Estimated Taxes.

Is it clear to you how to record estimated tax payments in QuickBooks? We have shared all the steps and processes to record tax payments in the accounting software QuickBooks. Make sure you understand each and every step along with its relevance and then do it.

Pay Federal Estimated Quarterly Taxes in QuickBooks Self-Employed

Self-employment taxes must be paid if you are self-employed. QuickBooks Self-Employed calculates your federal estimated quarterly tax payments so you know what to pay each quarter.

When it comes to making a tax payment, you have a few options. The method for paying your federal estimated taxes each quarter is as follows.

Step 1: Find out When the Federal Anticipated Quarterly Tax Payments are Due.

You should also check to see if your state demands projected quarterly tax payments.

Step 2: Find out How Much You Must Pay.

QuickBooks Self-Employed allows you to keep track of your self-employment income and spending. It computes your federal estimated quarterly taxes so you know how much to pay each quarter. Furthermore, it saves information that you can use to file taxes for your self-employed work at the end of the year.

Following is the way to collect your tax information from QuickBooks each quarter and wrap things up at the end of the year.

Getting Quarterly Tax Info

First Step: Get Your Federal Quarterly Tax Estimates.

  • Navigate to the Taxes section.
  • Select the Quarterly tab.
  • Select the quarter for which you require estimates.

Second Step: Make a Federal Estimated Quarterly Tax Payment.

Getting Annual Tax Info

First Step: Complete your tax checklist.

QuickBooks Self-Employed sends you a tax checklist before your annual taxes are due. This shows you what to review and how to complete any outstanding duties. It also allows you to maximize your tax deductions.

  • Choose Home in QuickBooks Self-Employed.
  • Navigate and select the tax checklist link which is next to your profile icon.
  • Select a task from the list. This will take you to the section of QuickBooks that needs to be reviewed.
  • Review and complete each job on the list.

Second Step: Download Your Tax Returns

Finish your tax checklist even if you do not intend to export to TurboTax. This refreshes all of your financial and tax reports. To obtain your reports:

  • Navigate to the Reports tab.
  • Find the desired report.
  • Choose the time period or tax year from the dropdown menu.
  • Select View or Download. If you wish to print or email a copy, click the arrow icon and then the choice.

Third Step: Fill up Your Annual Tax Return.

QuickBooks Self-Employed gives useful information to assist you with your tax preparation. It does not, however, directly manage tax filing.

Step 3: Make a Federal Estimated Quarterly Tax Payment.

Follow the steps for the approach you want to utilize. Whether you pay by mail or online, QuickBooks Self-Employed saves your information for the future quarter. Important: If you must make a late payment, follow the IRS’s instructions.

Pay by Mail

If you pay by mail, send your money and the estimated payment form (1040-ES voucher) together. You can complete this form in QuickBooks Self-Employed by following steps:

  • Navigate to the Taxes section of QuickBooks Self-Employed.
  • Select the Quarterly Taxes tab.
  • Select Pay Now.
  • Select the by mail option.
  • Fill out the 1040-ES payment voucher. Then click Continue.
  • Print your voucher.

The printed voucher instructs you on how to complete your forms, cheque and which IRS office to ship it to. Your cheque and voucher must be postmarked by the quarterly due date.

Pay Online

Step 1: Setting up of EFTPS account

First you have to sign up for an Electronic Federal Tax Payment System account follow the following steps:

  • Discover the fundamental enrollment criteria.
  • Go to the EFTPS website.
  • Select Enroll.
  • You have to follow all the steps in order to enroll as an individual.

The IRS will mail your PIN and enrollment number to you. You’ll need this information to sign in and make payments.

Step 2: Making of Tax Payment

You can make online payments once you’ve received your PIN and enrollment number.

First Case: If you do not have the Tax Bundle, you can pay the IRS directly through the Electronic Federal Tax Payment System website. Go to the EFTPS website and click Make a payment. Then go to the payment steps.

Second Case: If you have the Tax Bundle.

If you have the Tax Bundle, you can pay through the EFTPS website or directly through QuickBooks Self-Employed. Follow these steps in a web browser rather than the mobile app:

  • Navigate to the Taxes section of QuickBooks Self-Employed.
  • Select the Quarterly Taxes tab.
  • Select Pay Now.
  • Select the Online option.
  • Enter your EFTPS information and PIN.
  • Select the current amount or input a custom amount.
  • To complete the payment, simply follow the on-screen instructions.
  • QuickBooks transmits the money to the EFTPS immediately after you submit it. It may take 5-7 days for your payment to appear in your payment history on the EFTPS website.
  • Checking of the tax payment status

If the bank account from which you paid is linked to internet banking, you can check the status in QuickBooks. Depending on your bank, it could take 2 to 3 days.

  • Navigate to the Taxes menu.
  • Select the Quarterly Taxes tab.
  • Choose the quarter in which you made the payment.
  • Look for the money.

Don’t be concerned if you don’t notice a pending or finished payment after three days. Check that you designated the payment to the correct quarter.

  • Choose the Taxes option.
  • Select the Quarterly Taxes tab.
  • Select the quarter for which you paid.
  • Select the Find your projected tax payments link.
  • Look for the tax payment. Select the checkbox if you see it.
  • When you’re finished, select Mark as your tax payment method.

Step 4: Enter the Tax Payment into QuickBooks Self-Employed

You do not need to enter anything manually if the account from which you paid is linked to internet banking. When it downloads, all you have to do is categorize it as a tax payment.

If you paid with a non-online banking account or by mail, manually record the payment:

  • Navigate to the Transactions tab.
  • Select Add transaction.
  • Enter the date and fiscal year, quarterly federal tax payment in the description field.
  • Enter the payment amount and date.
  • First select the category and then Taxes, and finally Estimated Taxes.
  • Once you are done with all the above steps then you have to click on the Save button for saving the changes which you made.

We have that now you understood that the tax accounting is a collection of accounting processes and a beneficial tool that businesses use to understand their tax liability and avoid fines. Tax accounting is essential not just for corporations but also for individuals to disclose correct income, pay appropriate taxes, and avoid penalties or IRS audits. In case if you have any issue then you can connect with Dancing Numbers team via LIVE CHAT and get help.

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+1-800-596-0806 or chat with experts.

Frequently Asked Questions

Can Estimated Tax Payment be considered as an Expense? How Estimated Tax Payments on QuickBooks is categorized?

Such tax payments are personal. They are not regarded as a business expense. For that, you are needed to consider using the Equity Account. In case you have not set up an account, here is how a user can set up an account easily:

Step 1: Firstly, Navigate to the Accounting section and then choose Chart of Accounts.

Step 2: Now, press the New Button and choose Equity as the Account Type.

Step 3: When it is completed, now choose Estimated Taxes in the Detail Type using the given drop-down arrow.

Step 4: Now add the details of the account.

Step 5: Finally, press the given Save and Close button.

Is it Possible to Pay Quarterly Taxes with the help of QuickBooks Online?

No. the option to pay taxes quarterly in QuickBooks Online is not available. Since all the data are on one file, you can easily pay taxes outside QuickBooks manually. In case you wish to use QuickBooks Self-Employed, then it is possible to pay taxes inside QuickBooks.

How to Calculate Quarterly Taxes in QuickBooks?

Here are the steps to calculate Quarterly taxes in QuickBooks:

Step 1: In the QuickBooks Self-Employed, navigate to the Taxes menu.

Step 2: Choose the Quarterly Taxes tab.

Step 3: Choose Pay Now.

Step 4: Choose the Online Option.

Step 5: Add your EFTPS details and then the PIN.

Step 6: Choose the right amount or add a particular amount.

Step 7: Follow the steps provided on-screen to complete the payment.

What is a Quarterly Report?

Quarterly reports are financial and overall performance reports issued by a corporation every three months as mandated by the Securities and Exchange Commission (SEC). These papers comprise an executive summary, a performance report, future objectives, and strategies.

QuickBooks is Under Which Tax Bracket?

The expense categories in QuickBooks Self-Employed correspond to the Schedule C tax form. QuickBooks matches the correct line on your Schedule C form each time you categorize a transaction.

What is the Definition of Tax Accounting?

Tax accounting is the branch of accounting that deals with tax returns and payments. Individuals, businesses, corporations, and other legal entities all employ tax accounting. Individual tax accounting is concerned with income, eligible deductions, donations, and any investment profits or losses.

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