TAXES
The IRS offers an online tax calendar on their website, with options to even add reminders to your calendar. Be sure to know which ones apply to your business specifically and add to your calendar each year! The IRS site does offer an online calendar with options to subscribe or add reminders to your calendar.
ACCESS THE IRS CALENDAR HERE
Nope - not necessarily.
Wait, what? I know, that’s not what your old accountant said.
Estimated tax payments are not legally required, but of course the IRS & your state wants their money so they want to encourage you to pay it in often, just like you would if you were an employee. So, if you don’t, there might just be a small ‘underpayment penalty’ charged on your tax return, based on a number of factors.
But hear us - it’s a small penalty. And this is a place where you can use some cash strategy to decide what’s best for you & your business. You may decide (like a lot of our clients do) that keeping your money in your own pocket (especially if you will owe thousands) is worth paying a few hundred dollars at the end of the year. Paying some estimated/made up number throughout the year as tax estimated payments could lead to you having a overpayment, which you can’t get back until you file your return and they send to you - and that can be months from when you are making the payments!
We absolutely recommend that you have a savings strategy in place where you are setting the money aside in your own bank account. If you are taking advantage of our tax support package option, we will talk with you about all of these things so you can feel empowered about where your money can be best used so you can decide for yourself!
So...you made a bunch of money in your business last year (yay - congrats!) But, you didn’t have a tax strategy or plan in place (which we should fix for you for this new year, btw). And now, it’s April 15th and you have a tax bill rolling in.
We see this a lot with our new clients - and the first thing that we want to tell you is that it’s totally OK. You won’t get any shame or judgment from us, we promise. Sometimes a client will tell us they are going to run a flash sale to pay off their tax bill. Or, that they started saving for taxes this new year, so they are going to use that cash to pay that tax bill. Or dip into next month’s cash flow funds to pay this bill. Most of the time, we advise against this. Don’t use today’s money to pay last year’s tax bill.
If you do, many times you will find yourself in the exact same place again next year. Where you had sales this year and used that cash for last year and then you don’t have the cash to pay for this year’s bill. It’s a cycle that is really easy to fall into and we want you to stop that now. If you find that you are always feeling behind with your tax bill and don’t ever feel like you have the cash to pay it, this is likely what’s happening with you.
If you have a tax bill from a prior year (or anticipate you will have one for this year) get a payment plan set up for that balance. Both the IRS and your state will offer payment plans. Will you pay a little bit of interest and penalties on it? Of course, but they really are minimal. And then you can make smaller monthly payments against your balance to get it taken care of. We help our clients with this paperwork all of the time - it’s not scary and actually super easy and - in many cases can be done totally online without even having to talk to anyone.
Then, implement your tax strategy & savings plan today so you are saving cash from today’s sales to pay today’s tax bill. You can always pay off that payment plan balance early, but this way you are only committed to that small monthly payment, and you can finally get ahead and feel like you are taking proactive control of your taxes. This switch can be truly life-changing.
If you need one, YES. Easy answer. You can do it yourself for free online. If you don’t have your records together and it’s tax season, it would be better to take the time to put things together well and be sure they are correct than rush through it to get a return filed. If you work with a traditional accounting firm that is stressed and overloaded during tax season then you will also probably get better service and a lower tax bill if you work on your taxes with them after the tax season crunch is over.
But here’s the thing about extensions - they are only an extension of the paperwork, not of the time that you have to pay your taxes. Your actual tax bill is still due on the date above. If you are planning to pay your taxes (instead of setting up a payment plan), then you will want to estimate how much you will owe and pay that along with the extension before the due date of your return. And if you can’t - no problem, you can set up a payment plan later. Just know you will have some interest & penalties for not paying and that’s ok - you should still file the extension, that will reduce some of the penalties you might receive.
If you are an S-Corp, Partnership, or Corporation, keeping a balance sheet is required since it contains information that must be reported on your business tax return.
You can think of a balance sheet a bit like a list of cumulative totals for your company from the date you started until the day you are reviewing it. It will report things like your bank account, credit card and any loan balances. You may also have other assets, like computers that show up on there.
It will also have an equity section, which includes a running total (from the start of your business to today) of your contributions to and distributions from the company along with the company net income total since the start of the business.
Many accounting software programs that are marketed towards “self employed” folks don’t have the ability to run a balance sheet, so if you are an S-Corp (or think you may grow to be one someday) you will want to look at this when selecting a software. If you work with us, the QuickBooks Online subscription we recommend has this built in and we take care of this for you, no problem!
EIN stands for Employer Identification Number. It’s basically the social security number for your business. We believe every business should get an EIN, it’s free and you can do it online really easily at the IRS website, and receive it immediately in many cases.
Whether or not you are required to have one depends on the legal structure of your business. If you are a sole proprietor without employees, in most cases you aren’t required to have one, but again, it’s good to have. As soon as you hire employees you are required to have one.
If you create an LLC you will register that separately and it will have it’s on EIN. If your business doesn’t have an EIN, they will want to use your personal social security, and most people don’t like giving that out to everyone (with good reason!)
Wait, we were talking about taxes… not boats. I know, keep reading!
Your Safe Harbor amount is how much the IRS would like you to pay in throughout the year, it’s based on a calculation from your last tax return, and is equal to 110% of your Prior Year Taxes only your Form 1040 (Line 16).
If you pay in this amount through withholding from your paychecks or estimated tax payments, then you won’t have to pay an Underpayment penalty on your tax return, even if you have a balance due.
Resources
Additional
Corporate Filings
Payroll
Human Resources
Corp Net
Amanda J. Beren
aberen@corpnet.com
Direct: 888-449-2638 Ext. 105
