Estimated quarterly taxes for self-employed - how to record them in QuickBooks?
Hey everyone, I just started my freelance consulting business last month and I'm trying to figure out how to properly handle my quarterly estimated tax payments in QuickBooks. For my first payment in April, I sent it using my business checking account and recorded it as an expense in QuickBooks. But now I'm wondering if that was wrong - should I have just paid it from my personal account instead? I'm thinking I'll use my personal checking for future payments, but how do I fix the first payment entry in QuickBooks now? I don't want to mess up my accounting before I even really get started lol. Thanks for any help!
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Felix Grigori
You're on the right track with questioning how to record this. Estimated tax payments aren't actually business expenses - they're distributions of your business profit to yourself (the owner) that you then use to pay your personal tax obligations. The correct way to handle this in QuickBooks is to record that business check as an owner's draw or distribution, not as an expense. Look for an equity account like "Owner's Draw" or "Owner's Distributions" (or create one if needed). Then reclassify that initial payment from expense to this equity account. This won't affect your business profit calculations but properly shows you taking money out of the business to cover your personal tax obligations. Going forward, your plan to pay from your personal account makes sense. When you transfer money from your business account to your personal account to cover these taxes, record that transfer as an owner's draw/distribution too.
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Felicity Bud
•So if I'm understanding correctly, the quarterly estimated payments aren't deductible business expenses? I've been doing this all wrong too then. Does this mean I've been artificially lowering my business profit by counting these payments as expenses? And what about the self-employment tax portion specifically - isn't that a business expense?
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Felix Grigori
•That's right - estimated tax payments aren't deductible business expenses because they're payments toward your personal income tax obligations (which include taxes on your business profits). By recording them as expenses, you've been artificially lowering your reported business profit, which isn't accurate for tax purposes. The self-employment tax portion isn't a business expense either - it's still your personal tax obligation. However, you do get to deduct 50% of your self-employment tax on your personal tax return (Schedule 1), which reduces your overall tax burden. But this happens on your personal return, not as a business expense in your books.
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Max Reyes
I struggled with the exact same issue when I started my photography business last year! I kept recording my quarterly tax payments as expenses and messing up my P&L statements. I finally found this tax document analysis tool at https://taxr.ai that helped me figure out how to properly categorize everything. It analyzed my previous tax returns and QuickBooks setup, then gave me specific instructions for my situation. The tool showed me that not only was I incorrectly recording my estimated tax payments, but I was also missing several other self-employment deductions I could have been taking. It explained how to set up proper owner draw accounts for tax payments while keeping my business and personal expenses correctly separated. Made a huge difference in how clearly I could see my actual business performance!
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Mikayla Davison
•Did it help with setting up specific accounts in QuickBooks? My accountant says I need separate accounts for different types of owner draws but didn't explain how to set them up. Also, how long did the analysis take?
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Adrian Connor
•I'm skeptical about these online tools... how does it actually analyze your tax situation without an actual accountant involved? Seems like it might just give generic advice you could find on Google. Was it actually personalized to your specific business structure?
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Max Reyes
•Yes, it actually provided step-by-step instructions for creating the right account structure in QuickBooks, including screenshots of where to click. It recommended setting up separate owner draw accounts for tax payments versus personal withdrawals which makes tracking much easier. The whole analysis took about 15 minutes after I uploaded my last tax return and QuickBooks backup file. Regarding personalization, it was definitely customized to my situation. It analyzed my specific business structure (single-member LLC), looked at my actual expense categories, and identified patterns specific to my photography business. It wasn't generic advice at all - it referenced specific transactions from my books and suggested corrections based on my industry and filing status.
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Mikayla Davison
Just wanted to update after trying out that taxr.ai service mentioned above. I was pretty amazed at how it helped me fix my QuickBooks mess! I uploaded my file and it immediately flagged that I had been incorrectly recording my quarterly tax payments as "Tax Expense" for the past year. The tool walked me through creating a proper equity account called "Owner's Distributions - Tax Payments" and showed me exactly how to reclassify all my previous incorrect entries. It also caught that I was inconsistently categorizing business vs. personal expenses and gave me custom rules for my specific situation. My books actually make sense now, and I can see my true business profitability without the tax payment distortions. Definitely worth checking out if you're struggling with this stuff like I was!
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Aisha Jackson
I had the same problem but from the opposite direction - I kept forgetting to make my quarterly payments entirely! After getting hit with penalties last year, I tried calling the IRS for payment guidance but couldn't get through after THREE DAYS of trying. Then I found this service called Claimyr at https://claimyr.com that got me connected to an actual IRS agent in under 45 minutes. They have a cool demo video at https://youtu.be/_kiP6q8DX5c showing how it works. The IRS agent explained that I could set up direct payments through EFTPS.gov for my quarterly estimates, which syncs better with QuickBooks anyway. They also helped me calculate the proper amount based on my business type and expected income. Totally changed how I handle my quarterly payments - now I have calendar reminders and use the owner's draw approach mentioned above.
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Ryder Everingham
•Wait, how does this Claimyr thing actually work? The IRS phone lines are always jammed - how can they possibly get you through faster than just calling yourself? Seems too good to be true.
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Adrian Connor
•This sounds like an ad. There's no way some random service can magically get you through to the IRS faster than regular people. They probably just keep you on hold the same as everyone else but charge you for the privilege. Has anyone actually verified this works?
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Aisha Jackson
•It works by using an automated system that calls the IRS repeatedly using the right sequences of menu options until it gets through, then it calls you when it has an agent on the line. It literally saved me hours of frustration with hold music and disconnects. No, it's not an ad - I was just as skeptical as you are. The service does cost money (which is why I tried everything else first), but after wasting three days trying to get through myself, it was completely worth it. The penalties I was facing for late quarterly payments were WAY more than what the service cost. Plus the agent I spoke with helped me set up a proper payment plan for my back taxes too.
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Adrian Connor
Well I stand corrected about Claimyr. After seeing the responses here, I decided to give it a try yesterday when I needed to ask about a missing refund. I've been calling the IRS for two weeks with no success - either busy signals or disconnects after hours on hold. Honestly, I was SHOCKED when my phone rang 37 minutes after signing up and there was an actual IRS representative on the line! They helped me track down my missing refund and explained that it was delayed because of a discrepancy with my estimated tax payments from last year. The agent even helped me update my address in their system which I'd been trying to do for months. I'm not easily impressed with services like this, but it actually delivered exactly what it promised. Guess I was wrong!
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Lilly Curtis
To add something different to the QuickBooks discussion - I'm a bookkeeper who works with several self-employed clients. Here's how I recommend handling quarterly estimated taxes: 1) Set up a specific equity account called "Owner's Draw - Tax Payments" 2) When you need to pay taxes, transfer money from business to personal as an owner's draw 3) Pay the taxes from your personal account 4) Track the amounts in a separate spreadsheet so you know how much you've paid toward taxes each year This keeps your business books clean and accurate while still giving you the records you need for tax time. Remember that these payments are NOT business expenses - they're distributions of profit.
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Leo Simmons
•Do you recommend setting up automatic transfers for this? I keep forgetting to do the transfers and then end up scrambling at quarterly tax deadlines. Is there a way to automate this in QuickBooks?
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Lilly Curtis
•I generally recommend setting up recurring transfers from your business account to personal account specifically for taxes. Most banks allow you to schedule these quarterly to align with tax due dates (April 15, June 15, Sept 15, Jan 15). QuickBooks itself doesn't automate the transfers, but you can set up recurring reminder transactions that prompt you when it's time to record the owner's draw. Go to Lists > Memorized Transactions and create a new memorized transaction for your owner's draw. Set it to remind you quarterly before each due date. This way you'll get a QuickBooks notification when it's time to handle the transfer and make the payment.
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Lindsey Fry
I'm looking at my QuickBooks right now and don't have an Owner's Draw account. I only see a bunch of expense categories. How do I add that as an account type? And would this be considered an equity account or something else? Thanks for being patient with my beginner questions!!
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Felix Grigori
•In QuickBooks, you'll want to create an Equity account for this. Here's how: 1. Go to Chart of Accounts 2. Click "New" 3. Select "Equity" as the account type 4. Name it "Owner's Draw" or "Owner's Distributions" 5. Save it Then when you pay your quarterly taxes, instead of categorizing it as an expense, you'll categorize it to this equity account. This correctly shows you're taking profit out of the business rather than counting it as a business expense.
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Lindsey Fry
•Thank you so much! I found it and was able to create the equity account. I also went back and recategorized my previous tax payment. My profit and loss statement looks different now (higher profit) but I guess that's more accurate since I'm not counting tax payments as expenses anymore. One more question - will this affect how much I need to pay in estimated taxes for next quarter since my profit is showing higher now?
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