It should come as no surprise that Uncle Sam wants taxes paid in full during the course of the year. Avoiding the penalties associated with guessing wrong about those estimated tax payments is easy. Anyone, including any snow and ice management businesses, large or small, can usually avoid penalties by basing their estimated tax payments on the previous year’s tax bill.
Unfortunately, if the coming year turns out to be a bad one financially, basing estimated tax payments on the previous year can mean the government, not the business, gets use of those funds, interest free, for up to a year. If the coming year turns out to be a good one, basing estimated tax payments on the previous year may mean no penalty but a whopping tax bill when the tax return is filed – along with the first estimated tax installment for the upcoming tax year.
Estimating the income – and the tax bill – of any snow or ice management business can be a nightmare especially when compounded by the economy, our battling lawmakers, and the uncertainty over Obamacare and tax reform. While most self-employed snow removal professionals and businesses have software programs or a professional to help with estimated tax payments, few are aware of how to anticipate – or handle – changes.
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A taxing guessing game
Estimating the income and tax bill of a snow removal business is tough. Make payments that accurately reflect your tax liability and avoid penalties.
November 10, 2017
