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A Taxing Question

Julia

CGF II, Certified Grumble Framer Level 2
Now that the checks have been written to Uncle Sam, I am still reeling. I know that it's better to be paying taxes (at least that's what my accountant says) than not (a sign that one is making a profit). May I ask for an opinion on how small businesses manage to pay the full amount of estimated quarterly taxes based on your previous tax year information? Yes, I do know that the cost is built into our pricing, but what if you have a slow month or, like our situation, we are still building a client base in our location? Please help!
Thanks!
Julia
 
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Bob Larson

Grumbler
Yeah, I agree with your accountant. I got back a sizable refund this year (by sizable I mean nearly 4 zeroes) which was great, except for the fact that I'm basically getting a small part of the money that I invested back, so it was mine to begin with, and it's not even all of it.

I have no idea what I'll do when I have to start paying. I can only hope that by then I'll be busy enough to have the money to pay in.
 

David N Waldmann

SGF, Supreme Grumble Framer
Always take the advice of your accountant, but remember that you don't "have" to pay the amount based on last year's info. You only eliminate the possibility of a penalty if you pay the full amount of last years or at least 80% of this years.

We have a local customer who restores and sells antiques. His cash flow is very seasonal because he sells mostly at shows throughout the country in the late summer and fall. He never bothers to make his estimated payments, just pays whatever penalties he gets assessed. Says he'd rather have the money when he needs it.
 

Sherry Gray

CGF II, Certified Grumble Framer Level 2
I pay my personal payroll taxes monthly when I pay for my employees. That way I don't have to come up with a chunk of change quarterly or yearly; and my accountant just tells me how much to deposit at the bank. Works great for me.
 

B. Newman

SGF, Supreme Grumble Framer
I think we're talking about two different things here. Income taxes are "estimated" and payroll taxes are "known" based on the payroll already paid for the previous month or quarter.

Income taxes (at least in our experience) paid on time, are not assessed a penalty. If you don't make estimated payments, you simply have to pay a chunk at the end of the year.

Now, if you one time, owe a really huge amount, they will require you to make quarterly estimated payments for the next year. We've done it both ways.

But personally, I will never throw money away on any penality that I can reasonibly avoid.
 

Tim Hayes.

SGF, Supreme Grumble Framer
If you have estimated payments due then budget accordingly and pay them.

As far as payroll taxes: Fed & State witholding, Fed & State unemployment, and state sales tax(Virginia) I file and pay them all online. I have to pay them monthly so I set them up early in the month and set the date that the funds are withdrwan from the company checking account to a day before they are due. I print out a receipt with all the details and a confimation number. This allows me to pay on time but not overly early. It also eliminates any uncertainty about mail delivery time.

Here is the site for paying federal withholding taxes online. EFTPS
 
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