Third Quarter Estimated Taxes Due September 15

It’s that time again! Your federal estimated tax payment for the third quarter is due on September 15.

Your third quarter payment includes the months of June, July, and August, while the fourth quarter will include the months of September, October, November, and December. (Yes, the tax quarters for estimated taxes are not equal!)

To determine your business profit, add up your income for June, July, and August (parent payments, CACFP reimbursements, grants) and subtract your business expenses for these months. You will owe federal income tax plus Social Security tax (15.3%) on your profit.

Most child care providers do not need to file estimated taxes (IRS Form 1040 ES Estimated Tax for Individuals) because their spouse usually has enough withheld in taxes to cover them. If you are single or have a spouse who is unemployed or self-employed, you likely will need to file.

If you are not sure if you have paid in enough taxes for the months of June, July, and August, it’s worth making a payment. You goal is to have paid in at least 90% of the taxes you owe for this quarter to avoid paying a penalty, and, as always, if you pay in too much you will get a refund.

How do you know how much you will owe in taxes? If you were in business last year, use that as a guide. If this is your first year, use 20% of your gross income (parents fees plus Food Program income) for June and July as a conservative guess of how much you will owe. For more help, see Tom Copeland’s article on “How to Estimate Your Taxes in Your First Year of Business.”

You also should check your records to see if you will owe any state income taxes. If so, make a state estimated tax payment by September 15 as well. And set a reminder in your calendar for future tax deadlines: fourth quarter payments will be due on January 17, 2023.

Photo by Nataliya Vaitkevich