Originally Posted by Newby
My brother and I started our own S-Corp in Mar. '05(part-time actually cuz we still had f/t jobs). Our accountant said we wouldn't have to pay any taxes until we filed our yearly taxes(not sure I have 100% confidence in what she tells us). So we didn't. We both left our f/t jobs in the fall, and so we are now f/t with 'our business'. When we took our taxes in, our accountant said we should make estimates during 2006. My question is, were we supposed to do that in 2005? Granted we only each brought in about $6500 profit from our business. Maybe that was the reason we didn't have to make any estimates???? CAN SOMEONE HELP??!!
This is a very old thread, but it illustrates an important point of confusion between business owners and tax preparers, so I'll respond:
When tax preparers say that you don't need to make estimated payments (or if your estimated payments seem too low), what they usually mean is:
"You will not incur a tax penalty if you don't make estimated payments (or if your estimated payments are based on last year's tax liability)."
Which translates into: "You may owe money when it's time to file the tax return, but there won't be a penalty associated with it."
Can you see how the business owner may get confused?
Most business owners are thinking in terms of owing money, or not owing money, when it's time to file the tax return. But most tax preparers are thinking in terms of: what is the least amount my client can pay without incurring a penalty, and when is the latest possible time my client has to pay that amount without owning a penalty?
As a business owner, you may feel differently than your tax preparer does.
For cash flow reasons, or other reasons, you may want to make estimated payments, or you may want to make larger estimated payments, even if those payments are not necessary from a tax penalty standpoint. If this is the case, ask your tax preparer for ES payment vouchers, or ask for new ES payment vouchers based on this year's projected profit, rather than last year's tax liability.