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Tax preparation

Discussion in 'Business Operations' started by cp, Sep 9, 2001.

  1. SLS

    SLS LawnSite Bronze Member
    from Mars
    Posts: 1,540

    Right.

    I understand that I paid the penalty for paying all at once (2000).

    But when I called the IRS to ask them what the penalty was for, they pulled up my records FOR THIS YEAR and noticed that I paid one amount in the 1st quarter and then paid an even larger amount for the 2nd quarter (2001).

    That is when the IRS guy told me that NOT paying the same (equal) amounts for EACH quarter was a no-no and I would need to send a 1022 along with my 1040 to straighten it out. Maybe he was a trainee and just as confused as I ...heheheh.

    Now I know that I should just pay the 4 equal amounts (based on last years income-and figured by my accountant) and put what I have extra into a interest bearing account and pay any balance I owe with it in April.

    No sense in giving the government money they I can use to
    make some interest on it.....

    My accountant is going to figure the difference in tax for me in November and I'll use that figure when buying some new equipment in December...in order to reduce my tax liability for April.

    Thanks again. :)
     
  2. cp

    cp LawnSite Senior Member
    Posts: 263

    That just goes to show that whether right or wrong as long as you follow the rules you won't get penalized. And I think if possible I would rather keep buying equipment or other things rather than pay it to the government.

    Also anyone reading this thread, just starting a business, the lesson here is that you need professional people such as a CPA, lawyers, etc..

    Keep those comments coming...
     
  3. GroundKprs

    GroundKprs LawnSite Bronze Member
    Posts: 1,969

    If you pay equal installments based on last year's income, that is fine if this year's income is dramatically higher. If your income fluctuates seasonally, like most in this business, you are better off figuring actual tax liability for each quarter, and pay only what is due.

    Example: Last year's tax was $10,000, so you would pay $2.5K each quarter. In my flow of business expenses and income, I would only pay (approximately) $1K first quarter, $1K second (which is only 2 months), $3.5K third quarter, and $4.5K in last quarter. Compared to the guy who pays equal installments, I have $3K sitting on June 15, that he has given away too soon.

    Why give more than you have to? Form 2210 is just a way to reconcile your actual payments if you have seasonal type income. There is only a penalty if you have not paid properly.
     
  4. SLS

    SLS LawnSite Bronze Member
    from Mars
    Posts: 1,540

    Yes, Jim, that seems to be sound advice too. Thanks! :)
     

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