As tax payers and business owners, no one likes to owe the IRS money on April 15th. But why should you have to pay in?
* Did you underestimate your income or not withhold enough on your payrolls?
* Did you not take all the deductions you should have on your tax return?
* Were not set up properly as an S-Corp or other formation?
If a client owes (for example) $2000 in April, I ask them why did this happen? More times than not it’s not because they forgot mileage, didn’t contribute to an IRA, or had some erroneous accounting error (even though these things can happen). The biggest error business owners make is not planning ahead for April, especially seasonal businesses like construction or landscaping.
Our advise is to be pro active, put small amounts of money away monthly, every month, all year round. In this example, paying an extra $200 per month into federal withholding means this client would have gotten a small refund and not been frustrated in April. While most business owners can afford $200 per month to prepay their federal withholding, coming up with a chunk of $2000 is difficult to do. For those business owners that wait until the last minute to file their taxes, this amplifies their problem ten fold because they don’t have any time to generate additional cash to pay off their taxes.
If you or another business owner you know has to pay in every year on April 15th, we’d love to sit down with them and see what sort of planning can be done to eliminate this problem. We have great success managing client cash flow and tax obligations, almost all of our clients get refunds each and every year.