Taxes Due (Again!) - Estimated Payment Due Sept. 15
Does it feel like you just made your 2020 estimated payments? Well, guess what, it’s almost time to make them again!
The delayed 1st and 2nd quarter payments means there is less time between payments than normal, and the next payment is due Sept. 15. If you as a small business owner don’t have enough withholding from other sources of income to cover the taxes on your business income, you must pay estimated taxes to the IRS and, often, the state.
The CPA that helps with your taxes can help you figure the amount you need to pay, but they’ll need some information from you.
Here’s what you need to do:
First, get your financial records in order. Make sure your books are updated at least through July so you can project through year end. Think about what the rest of the year might look like financially. Do you expect a significant change in income or expenses the rest of the year? Adjust your estimates for this.
Remember, if you are an LLC or Sole Proprietor the guaranteed payments and/or draws you make are not expenses for the company and should be added back to your net income to come up with your taxable income.
Another key component this year is the PPP funds. The funds themselves are not income to the IRS (states will vary). If you’re going to request forgiveness for your PPP funds, you will NOT be able to deduct with the IRS any expenses paid using PPP funds. This means any PPP money that went to payroll, rent or utilities needs to be added back to your net income. This will create a higher net income than expected for many. You’ll need to pay taxes based on this higher amount (unless the rules are changed before taxes are filed – stay tuned!).
Don’t have the cash to make any tax payments? You’ve got a little bit of time – plan to set aside a small percentage of every deposit you make to save for September…and the next quarterly payment in either December or January. If you are not a C-corp, these payments can’t be deducted as an expense by your business, but you can take the funds as a distribution or bonus (S-Corp) or as a draw (Sole Proprietor or LLC).
Need help getting your books in order? We’d love to help you set up a plan to save money for taxes (and other priorities). Schedule a time to chat with us!