When you pay yourselves through self-employment—as independent contractors, locum tenens, CRNAs, freelancers, gig workers, or small business owners, you carry the responsibility of managing your tax obligations regardless of whether you opted to run your trade under sole proprietorship, limited liability company (LLC), or S Corporation.
While taxpayers focus on their federal responsibilities, state taxes are equally important. Failing to pay your state taxes can result in interest and costly penalties.
- Understand Your State’s Tax Rules
Each state has its own tax laws and imposes tax on income differently. There are even states, like Florida and Texas, that do not impose income tax at all. Visit your state’s officail Department of Revenue website for official tax rules and requirements.
- Make Quarterly Estimated Tax Payments
Most states require quarterly estimated tax payments if you expect to owe a certain amount of income. Failure to pay on time can lead to penalties and interest even if you fully pay your tax bill when you file your return.
Commonly, the deadline for paying state estimated taxes coincides with the IRS due dates:
- 1st Payment: April 15
- 2nd Payment: June 15
- 3rd Payment: September 15
- 4th Payment: January 15 of the following year
- Pay Your State Taxes as an Individual, use your name and SSN!
This is where many self-employed individuals make mistakes when paying their income taxes. You must remember that if you own a pass-through entity such as sole proprietorship, partnership, LLCs, or S corporation, your business does not pay income tax. The income from these business structures “passes through” to you, the owner.
Therefore, you must pay your estimated taxes as an individual and not as a business. It is a personal tax payment. This means that when you make quarterly estimated tax payments, you do so using your name and your Social Security Number (SSN). Never use the pass-through entity’s business name and EIN, or the revenue agencies will not be able to assign your tax payments to your personal account.
- Pay Through Your State’s Online Tax Portal
There are several options to pay your state taxes, but nothing beats the convenience of paying your taxes online. Most states offer online payment portals where you can view your payment history, schedule, and make fast, safe, and secure tax payments. Again, pay using your SSN since these are personal taxes.
Visit your state’s Department of Revenue website to find their official payment portals.
- Maintain Records of Your Tax Payments
Print or save a copy of your tax payments as proof of timely payments and as reference during filing your tax return.
Want to learn more?
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Contact us toll-free (855)529-1099 or make an appointment for a free consultation. Contact Us
