Tax Tips for Doulas: Quarterly Tax Payments

Part 4. Options to Making Quarterly Tax Payments for Doula Business Owners

Doula Business Quarterly TaxesIf you are making money in the doula business, then you may find that you owe money to the feds or state on your income tax return this year. If the amount owed on your Form 1040 is more than $1,000 for 2014, then you will need to file estimated quarterly tax payments in 2015. If the amount is less than $1,000, you can choose to file quarterly or prepare to come up with the money all at once next April. If you are currently in your first year of business, you are not required to file quarterly. In that case, you will not be penalized even if you owe more than $1,000. Learn more.

To figure the estimated amount you should be paying quarterly, take this year’s amount owed and divide it by four. If you are required to file quarterly, the IRS will send you payment slips with the recommended amount. However, if you anticipate an increase in income in the current year AND it is important to you to not owe money next April, consider increasing the quarterly payment amount.

The main point is to not owe more than $1,000 on April 15. If you do, you can be subjected to penalties and interest, driving up your liability. One option to making quarterly tax payments for a doula business is to decrease the number of exemptions claimed on W-2 family income (if any). For example, my husband and I have two children and my husband collects a bi-weekly paycheck from his employer. I have income from my childbirth education and doula business. In order to avoid the huge April tax hit, my husband opts to decrease the number of exemptions on his W-4 form at work to zero. This can be done at any time and ensures that his income is taxed at a higher rate throughout the year. One particularly good year, we still had a substantial liability in April so we increased the withholding on the W-4 an additional amount. The primary benefit of doing it this way is that it is simpler and based on the principle of out-of-sight, out-of-mind.

If, in a given tax year, you are due a refund, another option is to simply apply that amount towards next year’s taxes. This will then reduce the overall amount owed, whether you pay it quarterly or take an alternative method.

One final tip, remember that your first estimated quarterly tax payment for 2015 will also be due on April 15 at the same time that you are reconciling last year’s account.

Patty Brennan is the author of The Doula Business Guide: Creating a Successful MotherBaby Business, 2nd Edition. Now offering The Doula Business Guide Workshop and Webinar Series — an inspiring workshop and online class covering the nitty gritty of establishing a doula business and growing it into a sustainable income.

Posted by Patty Brennan on April 8, 2015 • Filed under
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