As a small business owner you have a menu of choices when paying the IRS
Paying the Internal Revenue Service may not be your favorite thing, but if you are a business owner and you want to stay in business, you must bite the bullet
and pay them. The following relates to income taxes only.
In general, there are three ways to pay the IRS…
Most people pay the IRS via payroll withholding. This is often the best way to pay-you can avoid late payment penalties because the IRS gets its money automatically via payroll deduction.
Many business owners issue themselves a bonus in December each year just to pay for taxes. It works like this: the business owner looks at how much tax he has paid year to date. If he has not paid enough he issues himself a bonus through payroll so that he can withhold the taxes due from the bonus check After taxes are withheld, the check often comes out to be less than $100, but the gross check could be $10 000 or more.
Estimated tax payments
Another common way to pay the IRS is to make quarterly estimated tax payments. These are due April 15, June 15, September 15 and January 15. If these payments are not made on time, you will pay late payment penalties.
Many small business owners choose not to make these payments or they choose not to pay the full amount because they would rather have the cash to use now in their business. They do this knowing that they will pay late payment penalties when they file taxes for the year.
If you are from another country and you are applying for any type of immigration visa, pay your taxes on time. You don’t want to jeopardize your immigration status by not paying taxes or not paying them in a timely manner.
Apply tax refund
Another way to pay the IRS is to have your refund from a prior year applied to the succeeding tax year. Let s say you were going to get a refund of $5,000 on your tax return.
Instead of receiving a refund check, you can choose to have IRS keep that money and pay it towards your next year’s taxes. You might want to do this because it can help avoid late payment penalties in the next year. From a budgeting standpoint, this can make a lot of sense, if you never “see” the money, you probably won’t miss it. This may also be a good idea for those of you who are married to a person who spends all the money he gets his hands on. If you have the payment applied to next year, the money never gets into your personal checking account. If the tax maze confuses you, you are not alone.
Consult a qualified tax advisor.