I am curious as to how you guys pay yourself. Do you right a check to yourself from your business account and use a business software program like Quicken? Do you use the payroll service that some banks offer? Do you use a third party, CPA, or some other service?
<the following is not from a tax professional, so see yours now!>
It depends on the tax entity your company is corporation, or multi-owner LLC, you might have to pay yourself via payroll. This is because US wants payroll taxes taken out before you get a chance to put in your pocket. With single owner LLC’s, and SP’s, you are 100% responsible for your taxes, and you can pay via qtrly payments(after you get the money). However, with the formers, the companies are treated as agents of the government, and taxes must be paid(collected) first prior to any distribution.
I affectingly call them “Slave taxes” since my company must to pay US money the employee never sees, so it must be rental fees for using a US citizen.
See your tax adviser!!!
P.S. I think there is time to still extend and give yourself a few more months to get the math right.
ONE: You do not need a CPA!!! Expensive. A local accounting service would meet your needs. Or, get Quicken quick books, or any good accounting program and do your own accounting.
Write yourself a check out of the business account, and pay all bills out of that account, makes it easier come tax time.
Keep in mind, you will need to make quarterly tax payments to the feds of your income, and if you are a sole proprietorship, that would be all income, taken out of business checking, and left in the business account. You will also need to make quarterly payments for any state taxes you would owe.
You will pay estimated income tax liability on all net income, plus you will also pay ALL of the FICA (social security) taxes. And that is around 16%.
You pay both sides of that tax, the employer side and the employee side.
Try not to intermingle business account and personal account, makes it much easier at tax time.
I do all of my accounting, not that hard for me as I have a background in accounting. For a small business, not that tough. I do have an accountant/CPA do my federal and state income tax return. You may be able to get some help/books/forms from your local office depot, etc.
Linas, I need your CPA!! Thats a bargin!! Mine charges a bucket full, especially fed and state tax returns. Just paid him for this years returns $700. ouch And he doesn’t even provide the postage. Gotta run, has to be post marked today!!!
I use a local payroll company that cuts a monthly pay check for myself, and files all of the tax forms with payment to the feds and state government. This service cost about $40.00 per month. Annual tax returns are additional through our accountant. I use Quickbooks to record income and pay bills.
Much more expensive is going through an IRS audit and losing! Penalties, intrest and an accountant to guide you through a very prevenatble mess is all much, much more expensive in terms of real dollars and time.
If you do your own accounting without an extensive background in accounting and tax law, you have a fool for a client.
Quick books is good for keeping track of everything, but I like the idea of having someone to turn to (ie blame;-) ) if the $hit hits the fan.
It is simply a cost of doing business (like tools, insurance, etc) and I believe - but ask your tax professional - tax deductible.