Understanding the Tax Consequences & Differences of Estimated Tax Payments versus Payroll Withholdings

Understanding the Tax Consequences & Differences of Estimated Tax Payments versus Payroll Withholdings

What You Don’t Know Can Expose You to Unnecessary IRS Penalties & Interest

Perhaps the most common error is the failure of taxpayers to anticipate their current year’s taxable income and to plan ahead by paying the IRS and state taxes as the income is earned.  Failure of taxpayers in any of the above areas will also negatively impact their ability to plan for and pay their taxes on a timely basis.  Also the U.S. tax system is a graduated system in which the marginal tax rates increase as does a taxpayers income.  Taxpayers fail to see their return as the dynamic calculation that it is, as income and lifestyle changes and tax law continually impact a taxpayer’s final calculation of tax liability.

Tax Advantages of GA S Corporations

His CPA, P.C. (a #DuluthGACPA Firm) aggressively works to be proactive in the planning for and anticipation of what will be your year-end liability.  Put our firm to work for you to avoid unnecessary and unpleasant surprises.

Being able to avoid the most common pitfalls taxpayers make is critical to your personal financial success.  Careful discernment and wise application of tax law is an essential and critical part of avoiding otherwise avoidable IRS notices, penalties, responsibilities, IRS audits and amendment of prepared returns.  As a Body of Believers, we are commanded to give unto Caesar what is Caesar’s.  As such and based on the premise of the U.S. tax system, we as taxpayers are solely responsible for the initial filing of our returns and the fair and just filing of our lowest legal possible tax.  Avoiding these top pitfalls that many fall prey to will be an integral step in the proper preparation of your return. Tax law treats monies withheld from an employee’s paycheck as having been paid evenly throughout the year whereas estimated tax payments are not and might unnecessarily expose the owner of an S Corporation, LLC, LLP or Partnership to needless late payment fines and penalties. The below is a sample letter we might use to send to a client to ensure that they avoid underpayment taxes, penalties and interest:

At a minimum to avoid any penalties and interest I suggest you take the below paycheck by year-end. 

This will ensure that you pay in at least enough to forestall any penalties and interest for any late payments that might otherwise occur.  

Your paycheck will be as follows: 

Gross Pay of $ 10,000, Federal withholding of 8,000, State withholding of 1,000, FICA Medicare of  765 for a Net Paycheck of  $235. 

Do not pay these under-withholding amounts via estimated tax payments as these will guarantee the potential assessment of penalties and interest. 

For the upcoming year, I suggest you triple your withholding from your regular paycheck.

John Dillard CPA of His CPA at 770 814 9304 and visit http://www.hiscpa.com/ (a Christian CPA firm). At His CPA we march to the beat of a higher drummer where we put the “Golden Rule” to work each and every day by “Serving Him by Serving You…One Tax Return at a Time.”

We advise clients on: IRS representation, Offer in Compromise, Tax Problems, Incorporation in Georgia, Corporate and Personal Income Tax Returns, Part-time CFO, Virtual Controller, Business Planning, Payroll Administration, Bookkeeping.  #SuwaneeCPA   #SuwaneeIncomeTaxPreparation


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