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paying taxes

hammadlatifeh
Level 3

HI

I'm so embarrassed to ask this question, but my client started his business in 2020, he didn't pay any taxes except for payroll taxes, I know even if he owes the IRS it's gonna be very little, so should we wait till we file 1040 and pay it or should we just pay it right now to be on the safe side when we file, especially that he filed 941-x, and as you know we have to wait till we hear from them, the other thing do you think he should file an extent from now or wait till April 15.

THANKS

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qbteachmt
Level 15

"how to put these numbers in schedule c where should I put the payroll taxes"

Yes, we covered this before. There is no such thing as Payroll Tax for the person or that business. You will change everything that seems related to payroll, to be Draw = owner Took the funds. That is not business expense. You remove it from Expense. There is no Salary, no FICA, no SUTA and no FUTA. Any amounts treated as payroll are no longer Payroll.

And waiting on the IRS to respond to the 941-X means you are simply waiting for them to refund the amount, which you would then give to him, or he can put into the business bank account as part of owner funds (like returning a draw or as if that is new money invested), because a Schedule C business is not tracking Retained Earnings or Stock Shares for the business in the tax filing.

"but he paid over 2000 in payroll taxes."

Which is what you should have requested be refunded, by filing 1 or more 941-X (per quarter that the wrong 941 was filed).

You don't need to wait on the 941-X. You need to have all of the business info from 2020 finalized, and the personal data, too, if you are preparing the 1040. The 941-X is not part of any of this.

 

Fix the data, then use it to file taxes. I would not file for an extension unless there is something you don't have and you know you are expecting, such as something in their personal tax picture hasn't come in, yet.

 

And yes, this person needs guidance for filing "quarterly estimates" if that applies, because the first quarter for 2021 is due April 15. Then, June 15, Sept 15 and Jan 15, 2022 (roughly).

That means he needs to be prepared to pay what he owes for 2020 and the first estimates for 2021. His State might have a similar requirement.

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6 Replies 6
TaxGuyBill
Level 14

If he filed a 941-X, there is no need to wait for anything.  I doubt if you would hear from the IRS about it.

So if he has all of his information ready, you could file the 1040 immediately.

 

If he did not make Estimated Tax payments, he might owe a penalty for not making payments on time, and that penalty keeps growing until the payment is made.  However, that "penalty" is basically just a low interest rate (3%?), so it usually isn't a  big deal to wait a little while.

But yes, paying the full amount due now would stop that penalty from increasing.

But the full payment SHOULD be made by the due date of the tax return (usually April 15th), because the penalty for paying after that is higher.

hammadlatifeh
Level 3

Thank you so much for replying but I thought we need to wait until we hear from them especially that he over paid his situation is kinda weird he paid him self a salary and paid payroll taxes so now my problem is how to put these numbers in schedule c where should I put the payroll taxes I can move the wage to owners withdraw but he paid over 2000 in payroll taxes. 
thanks again 

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qbteachmt
Level 15

"how to put these numbers in schedule c where should I put the payroll taxes"

Yes, we covered this before. There is no such thing as Payroll Tax for the person or that business. You will change everything that seems related to payroll, to be Draw = owner Took the funds. That is not business expense. You remove it from Expense. There is no Salary, no FICA, no SUTA and no FUTA. Any amounts treated as payroll are no longer Payroll.

And waiting on the IRS to respond to the 941-X means you are simply waiting for them to refund the amount, which you would then give to him, or he can put into the business bank account as part of owner funds (like returning a draw or as if that is new money invested), because a Schedule C business is not tracking Retained Earnings or Stock Shares for the business in the tax filing.

"but he paid over 2000 in payroll taxes."

Which is what you should have requested be refunded, by filing 1 or more 941-X (per quarter that the wrong 941 was filed).

You don't need to wait on the 941-X. You need to have all of the business info from 2020 finalized, and the personal data, too, if you are preparing the 1040. The 941-X is not part of any of this.

 

Fix the data, then use it to file taxes. I would not file for an extension unless there is something you don't have and you know you are expecting, such as something in their personal tax picture hasn't come in, yet.

 

And yes, this person needs guidance for filing "quarterly estimates" if that applies, because the first quarter for 2021 is due April 15. Then, June 15, Sept 15 and Jan 15, 2022 (roughly).

That means he needs to be prepared to pay what he owes for 2020 and the first estimates for 2021. His State might have a similar requirement.

*******************************
"Level Up" is a gaming function, not a real life function.

View solution in original post

hammadlatifeh
Level 3

I can't thank you enough, now the whole picture is clear.

THANKS ALOT 

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TaxGuyBill
Level 14

As was mentioned, you don't need to wait.

And there is nothing to enter on the Schedule C at all about payroll taxes.  They are being refunded, so it is as if they did not make any payments at all (which may result in some penalties).

The non-wages or owner's withdrawal are not entered on Schedule C either.  None of that goes on Schedule C. 

 

hammadlatifeh
Level 3

Thank yoou so much for your time, every thing is clear now

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