When are 2021 Q3 estimated taxes due for self-employed individuals?
Self-employed business owners must make estimated tax payments if they expect to owe at least $1,000 in a calendar year or owe taxes from the previous year. Referred to as estimated taxes, business owners make quarterly tax payments to the Internal Revenue Service (IRS) for estimated earnings from each quarter of the year.
To figure the amount of your estimated tax payment, you'll need to calculate your taxable income, taking into account your adjusted gross income, deductions, and credits for that tax year. If you need guidance on how much tax you should pay for a given quarter, you can use Form 1040-ES or the IRS's tax withholding calculator. If you’re struggling to figure this all out, getting a little assistance can make a world of difference (and save you time and money).
You should have already paid estimated taxes for both the first and second quarters for 2021. Q3 estimated taxes are due on September 15, 2021. The fourth quarter, and final estimated tax payment for 2021, is due on January 17, 2022.
If you know you’ll owe estimated taxes, it’s a good idea to calendar the due dates and a reminder date for each quarter.
Do I need to account for any pandemic grant money or assistance in my quarterly taxes?
The COVID-19 pandemic has put most businesses back on their heels over the last year and a half. To help business owners, the federal and state governments and private entities have provided grant money, and other resources, helping businesses of all sizes keep their doors open.
Generally, grants don't have to be paid back. That doesn't mean, however, that grants are not taxable under the Internal Revenue Code. Grants are simply another form of income—which is taxable unless the government creates an exception.
If you received a COVID-19-related grant for your business (and not one based on individual or family need), then that grant would be considered taxable income when determining your quarterly estimated taxes.
For example, the Coronavirus Aid, Relief, and Economic Security (CARES) Act established the Coronavirus Relief Fund, which gave billions of dollars in grant money to struggling businesses. Unfortunately, the IRS did not create an exception for this aid for these grants and instead stated that this grant money was considered taxable income.
The Paycheck Protection Program (PPP) loan program, also related to financial needs caused by the COVID-19 pandemic, served as an exception to the general taxable income rule, as discussed further below.
Will I owe taxes if I received a PPP loan and it was forgiven?
Many small businesses have received Paycheck Protection Program (PPP) loans over the past year, helping offset the financial stress caused by the global pandemic. However, the taxation rules have changed several times since the passage of the CARES Act in March 2020.
Based on the most recent guidance through the Coronavirus Response and Relief Supplemental Appropriations Act (CRRSAA), Congress clearly stated that if your PPP loan qualifies for forgiveness, it is not considered taxable income. Therefore, you don’t have to consider it when estimating your quarterly taxes.
It has been an unusual tax year for many businesses, but especially for the self-employed. If you have received a COVID-19-related grant or loan, it's best to contact an attorney to help you identify any taxes you may owe.
How do I pay my Q3 2021 quarterly taxes?
To pay Q3 estimated taxes, you can pay them online through IRS Direct Pay, using your checking or savings account or a credit or debit card. You can also pay through the Electronic Federal Tax Payment System (EFTPS). You may prefer to pay weekly, bi-weekly, or monthly based on your business's cash flow. As long as you pay in enough by the end of the quarter, you can choose a more flexible option to fit your business. If you prefer the paper route, you can mail in a check or money order for your estimated payments.
What happens if I miss my Q3 2021 tax payment?
If you don't pay (or you underpay) your quarterly taxes, you might face a penalty. Generally, as a self-employed individual, you don't have to pay the penalty if you owe less than $1,000 in tax or if:
- You paid at least 90% of the estimated tax for the current tax year; or,
- You paid 100% of the tax shown on your previous years' tax return, whichever is less.
To see if you owe a penalty due to underpayment, you can use Form 2210 to help you determine if you do and how much it’s going to cost.
To stay in business, you need to make money and satisfy your legal obligations, that includes paying your taxes. If you are a self-employed business owner, be sure to make your next estimated quarterly payment by September 15, 2021.
If you have questions about how much to pay, or if you're interested in putting a tax plan in place—for both federal and state taxes—then ask a lawyer for help today.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.