Thursday, January 12, 2017

Pay or Delay? What to Do With Your Small Business Taxes in 2017

Small business owners, how much do you know about taxes? You know that your tax return is due April 15th, right? Of course, if you need more time, you or your accountant could file for an extension for October 15th.

But what about paying your small business taxes? Have you paid Uncle Sam on time throughout the year? Or have you delayed payment? If it’s the latter, you might want to make a New Year’s resolution to pay your taxes on time. After all, it’s a best business practice, right?

Read on to learn about paying and delaying your small business taxes in 2017. What you should do may surprise you, no matter what you’ve heard or read.

Do You Know What to Do with Your Small Business Taxes?

Small business owners, you might be in for a shock. And here it is. If you DO NOT pay your taxes on time, meaning April 15th—not October 15th—you will not be compliant. The extension on April 15th is meant to be an “extension to file your tax return.” It is not an extension to pay your taxes!

Regardless of your entity type (i.e., S Corp, LLC, etc.), you should have a relationship with a really good accountant, and you should also have tax planning throughout the year. If you DO NOT pay your taxes for the whole year on April 15th, you will have a late estimated tax payment penalty. Why? Because you didn’t pay your taxes throughout the year—you should be paying them.

Keep in mind that estimated tax payments are due April 15th, June 15th, September 15th and January 15th. If you own a small business, you should be paying some kind of tax on those dates. However, you won’t know how much to pay unless you work with an accountant.

The worst thing you can do is not file a tax return for your small business because you can’t pay the taxes. Being in compliance with the IRS and being filing compliant is very important. Of course, paying the taxes is extremely important as well. But blatantly ignoring filing your tax returns because you don’t have the money is not a good idea.

There are no pros to not paying your small business taxes!

But there are many cons. Here are the top ones:

  • Various penalties are associated with not paying your taxes on time or not paying them at all.
  • If you don’t file your tax returns, you will most definitely be subjected to an audit.
  • If you’re already in a payment plan situation because you couldn’t afford to pay the taxes when they were due, but you let another year go by without paying your small business taxes and you file your return without payment, you are now out of compliance with your payment plan.

If you’ve been out of compliance or horrible at paying attention to your small business taxes and not getting it done, it’s time to recognize that you are a business owner and it’s your responsibility to ensure that you file your tax return and pay your taxes on time.

It’s time for you to get it together in 2017!

Keep in mind that the longer you ignore your small business taxes and stay out of compliance, the more trouble you’re going to be in with the IRS. Is it worth the risk? No, it’s not.

You Should Be Paying Your Small Business Taxes

Have you heard the phrase, “The only two things you need to do in life are pay taxes and die?” As morbid as it may sound, it’s true. You can’t forget about paying your small business taxes! If you do, you may find yourself in deep trouble.

To help you avoid paying serious penalties or even worse—jail time—pay for tax planning. You might not want to pay for it, but how can you not afford to do so?

It doesn’t matter if you make X amount of thousands of dollars per year. For example, if you’re making over $20,000, you can expect to pay a 15% self-employment tax. Do you know that you need to make at least a 15% quarterly payment to cover the tax? Also keep in mind that you don’t know what your “real bottom line” is because you don’t know the tax law. And remember, you can’t write off everything. For example, you can’t write off life insurance or long-term disability.

If you’re a small business owner and you never owe money at the end of the year, know that it’s very rare.

It’s important to do tax planning at a minimum of twice per year. Quarterly is better. Why? Because your accountant might point out that you should file as an S Corp instead of a Single Member LLC. In fact, one small business owner is about to save $10,000 in self-employment tax because they will be moving to an S Corp status next year.

Thinks about this: If it costs you $1,000 per year for tax planning and you’re able to save $5,000, isn’t that a great investment in you and your business? Yes, it is!

The post Pay or Delay? What to Do With Your Small Business Taxes in 2017 appeared first on Fundera Ledger.

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