Business tax

How to Estimate Your Business Tax in Seconds with This Online Tool

Latest posts by Aaron Lesher (see all)

A free tax calculator for small businesses

Whether you run a small business, independent contracting work or just freelance on the side, it can be overwhelming and confusing to try and estimate your business tax. Use the tax calculator below to estimate your business income by week, month, quarter or year by configuring how much and how often you plan to work.

Why 94 percent of business owners need to use this calculator

According to the Tax Foundation, over 94 percent of U.S. businesses are so-called “pass-through entities.” What this means is that if your business is a sole proprietorship, LLC, partnership or S-Corporation, your taxes are based on your personal tax rate, not a business tax rate. Only C-Corporations are subject to a separate business tax rate. The interactive calculator here uses the IRS tax rules for small businesses to estimate your tax obligation.

Why knowing your business tax estimate saves you money

Without even a ballpark idea of how much to set aside for your self-employment taxes, you can be blindsided at the end of the year by a huge tax payment you weren’t aware of. We’ve heard horror stories of entrepreneurs emptying out their savings or taking out a high interest rate loan to pay the IRS back taxes plus fees and penalties.

As a general rule, you should plan to set aside 30 percent of your business earnings (before expenses) to meet your tax obligation. It’s likely your effective tax rate will be less than 30 percent, but it’s always good to be conservative.

So, entrepreneurs should deposit money into a savings account and wait until April 15 rolls around, right? Actually, wrong. The IRS requires you to pay estimated taxes quarterly if you expect to owe $1,000 or more in business taxes throughout the year.

You can find the quarterly due dates on the IRS’s website. These payments count toward your annual tax obligation, so if you estimate accurately, you’ll owe very little additional tax (or qualify for a refund) at the end of the year.

How are my taxes determined?

Your tax rate is based on your taxable income, not your gross revenue. Taxable income is equal to your earnings minus your deductible business expenses, like rent, employee wages and benefits, equipment, insurance and commissions paid.

If you’re thinking ahead, this means the more business deductions you keep track of, the more you can deduct, and the smaller your tax bill will be. 

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