As business owners, it’s easy to lose track of time. From planning marketing campaigns to hiring staff to evaluating profit and loss statements, chances are you forget a thing or two every now and then. Missing tax deadlines is one thing you don’t want to forget, however. Learning how to stay ahead of the tax crunch every year is critical to your business’ stability and success.
If you find yourself missing filing deadlines, you probably want to get yourself a reliable accountant (or a new accountant if you already have one!). You can also implement these strategies to beat the tax crunch like a pro.
1. Pay your estimated taxes every quarter
Instead of waiting until the very end of tax season to pay all of your business taxes at once, consider paying your estimated taxes to the IRS every quarter. For some business owners, submitting quarterly tax payments may even be a requirement.
According to the IRS, “taxes must be paid as you earn or receive income during the year, either through withholding or estimated tax payments. If the amount of income tax withheld from your salary or pension is not enough, or if you receive income such as interest, dividends, alimony, self-employment income, capital gains, prizes and awards, you may have to make estimated tax payments.”
“If you are in business for yourself, you generally need to make estimated tax payments. Estimated tax is used to pay not only income tax, but other taxes such as self-employment tax and alternative minimum tax.”
While paying quarterly taxes is a best practice, several business owners have yet to set up automatic payments to cover their estimated taxes. Reach out to your accountant to learn how to get on a proper payment schedule, or visit the IRS’s website for more insights that can help you beat the tax crunch.
2. Pay yourself a reasonable salary
One of the best parts of running a business is setting your own salary. But with great power comes great responsibility — especially when it comes to paying your business taxes.
For example, the IRS requires S Corporation business owners to pay themselves a reasonable salary, which must be at least what other businesses pay for similar services.
Why follow this guideline? It prevents you from taking excessive distributions if you set your salary too low. Disguising your salary as a distribution could lead to tax penalties of up to 100%, as well as negligence penalties, according to Collective.
As you can see, paying yourself a reasonable salary can save you from lots of fines and headaches around tax season. If you find yourself taking several distributions to make up for a small salary, connect with your accountant to address this potential issue before you find yourself in another tax crunch.
You can also explore this IRS resource for insights involving salaries for other types of business structures.
3. Mark your calendar & set reminders
There’s a silver lining among all of these warnings: tax season comes along every single year (and quarter!), so you have the opportunity to plan ahead.
Mark your calendar with important tax deadlines (and deadline reminders) so you can gather all the documents you need ahead of time. Organizing W-2s, receipts and other tax documents is a job in and of itself, so give yourself ample time to get the job done in a timely, stress-free manner.
Want to get a head start and put tax crunches to rest? Mark your calendar with these quarterly estimated tax deadlines for 2023:
- 2023 1st Quarter (January 1 – Mar 31, 2023): April 18, 2023
- 2023 2nd Quarter (April 1 – May 31): June 15, 2023
- 2023 3rd Quarter (June 1 – August 31): September 15, 2023
- 2023 4th Quarter (September 1 – December 31): January 16, 2024
Beat the tax crunch by attending our upcoming workshops
As always, our business growth strategists are here to support you in taking your business to the next level. That’s why we’re excited to invite you to our free tax planning workshop — stay tuned for dates.
You can also contact us with any business-related questions. Our team is here for you, and we’re committed to helping you level up with confidence.
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