If you’re like most small business owners, you groan when April rolls around. You know you have a hefty tax bill waiting for you, and it’s one you despise paying.
What’s your plan for paying that tax bill? Did you know you had options? Let’s look at three smart ways for paying your small business taxes paid with minimum stress or fees.
Method 1: The Plan-Ahead Strategy
Now, we’re not all this diligent, but if you plan now for the taxes you’ll need to pay later, you can easily set aside enough to cover the bill. Likely, your tax bill is pretty steadily the same amount each year. So use this year’s amount as a guideline for next year. How much would you need to set aside monthly to cover it in 12 months?
If you don’t have a business savings account, set one up so the money is diverted from your savings account and you’re not tempted to spend it. Look for a high-yield savings account so the interest helps you toward your financial goal.
You can also send the IRS quarterly estimated tax payments to keep from having a gigantic bill come April.
Method 2: IRS Payment Plan
If you weren’t able to set aside funds to cover your tax bill, don’t drag your feet in letting the IRS know, or you’ll pay hefty penalty fees. Instead, see if you qualify for a payment plan with the IRS. If your business owes $25,000 or less in payroll taxes, you can set up an installment agreement to stretch out your payments over several months.
You’ll pay a fee of $120 to set up a standard agreement or payroll deduction agreement, and $52 to set up a Direct Debit agreement, but it’s far less than recurring late fees.
Method 3: Credit Card
This is the least ideal method unless you have a rewards card that will essentially make it worth using a credit card to pay your tax bill, or you have a card with zero percent interest. In those cases, a credit card is actually a boon to pay your bill with.
Whichever method you choose, decide on your plan of attack before April 15 rolls around. It may take a while to set up whichever option you’re using, so start investigating now.