Cyber Week Sale! 50% Off All Access

Why Missing Quarterly Tax Deposits Can Devastate Your Business Don't get yourself in trouble with the IRS. Here's how to make sure you stay on top of tax deposits.

By Mark J. Kohler

Opinions expressed by Entrepreneur contributors are their own.

Andrew Harrer/Bloomberg

Tax problems can snowball quickly and sap the lifeblood out of a business quicker than almost any other problem.

As entrepreneurs, we come to realize quickly no one is 'withholding' from a paycheck for us and we have to be proactive about making deposits so we don't get behind with the IRS.

Some of you who filed an extension earlier this year may be filing your Corporate or LLC tax returns this week -- just a reminder the due date is September 16 -- and experiencing the shock that you didn't make enough quarterly deposits last year and are facing a big tax bill.

This can be a scary and daunting situation but the worst thing you can do is ignore the problem, go into denial and perhaps choose to not even file your tax return. This could make things even worse. Let me assure you that the penalties for not filing when you owe are even worse than just filing your tax return and working out a payment plan with the IRS a few months from now.

As for the rest of us trying to be proactive and stay on top of our tax deposits, here are a few basics to keep in mind:

1. It all starts with your federal tax deposits. These are generally due for all business owners on April 15, June 15, September 15 of the current tax year and January 15 at the beginning of the following tax year. The deposits are based on what you think you will owe at the end of the year, and yes, there are penalties if you don't deposit enough during the year.

More importantly, the penalties aren't as daunting as the shock of realizing you didn't make the proper amount of deposits and you have a big tax payment due when you file your return. That is when things can get out of control when trying to make your current year's deposits, catch up on last year and still cover payroll and regular business expenses. That's the 'snowball' I was talking about earlier.

2. What about the state tax? Yes, if you live in a state with an income-tax, you need to take this seriously as well and should certainly plan on making quarterly deposits to the state. This can easily be calculated based on your prior year's liability and coupons printed out from the applicable state website.

3. Don't forget about payroll reports and deposits. If you have an S-Corporation or you have employees, payroll deposits are critical when filing your payroll reports. This is the most serious type of quarterly deposit. The IRS treats withholdings from employee's paychecks and the match, as "sacred funds". It's not uncommon to see employers actually go to jail for keeping deposits and never remitting the funds to the IRS.

Now keep in mind that as your payroll levels increase, you may be required to make monthly or even weekly deposits for payroll taxes. The IRS doesn't want to wait around until the end of the quarter to get there funds. It also actually makes life easier on you if you make the deposits more frequently and it reduces your chance of getting behind.

4. What to do when there is uncertainty. This whole process doesn't have to be mysterious or confusing. When you file your tax return, your accountant should prepare tax deposit coupons for you to follow based on your last year's tax liability.

That said, problems can arise if your income fluctuates during the year or you file your tax return on extension well after several of your tax deposits are due.

Bottom line: Don't put on the blinders if you are questioning how much or when you should make your deposits. Try to meet with your CPA at least once or twice a year for a quick planning session and not only cover your tax strategy plan, but also your deposit schedule and estimated tax bill for the year.

Mark J. Kohler

Entrepreneur Leadership Network® VIP

Author, Attorney and CPA

Mark Kohler, M.PR.A., C.P.A., J.D., is a highly respected Founding and Senior Partner at KKOS Lawyers, specializing in tax, legal, wealth, estate, and asset protection planning. With a reputation as a YouTube personality, best-selling author, and national speaker, Kohler is dedicated to guiding clients through complex legal and financial landscapes to achieve their American Dream. He also serves as the co-founder and Board Member of the Directed IRA Trust Company and has launched the Main Street Certified Tax Advisor Program to train CPAs and Enrolled Agents nationwide. As the co-host of The Main Street Business Podcast and The Directed IRA Podcast, he simplifies intricate topics like legal and tax strategy, asset protection, retirement, investing, and wealth growth. Mark Kohler's commitment to helping entrepreneurs and small business owners attain success and financial security has made him a trusted expert in the field, benefiting countless individuals and businesses in navigating the financial and business world with confidence.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Side Hustle

'I Just Hustled': She Earned More Than $300,000 Wrapping Gifts Last Year — and It All Started With a Side Hustle

When Michelle Hensley lost her husband to cancer, she needed to figure out how to earn an income for her family.

Science & Technology

You Have 1 Month Left to Prepare for These 5 AI-Powered Marketing Changes — Act Now Before It's Too Late.

Big changes in 2025 will redefine marketing as AI evolves rapidly, offering growth opportunities but also risks. Learn how to stay ahead in this week's video, covering new search platforms and avoiding over-automation.

Leadership

How to Master the Art of Delegation — Lessons From Andrew Carnegie's Legacy

Here's what Andrew Carnegie can teach today's entrepreneurs about leadership, teamwork and effective delegation.

Business Ideas

63 Small Business Ideas to Start in 2024

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2024.

Growing a Business

This Breakthrough Technology is Poised to Accelerate Your Company's Growth

Discover a breakthrough technology stacked on top of generative AI, now poised to revolutionize businesses across nearly every sector. Unlock unprecedented growth and profitability potential, achieving levels once thought unattainable.