Which Checking Account Should I Use to Pay Business Taxes?
Question: Which Checking Account Should I Use to Pay My Business Taxes?
Q: Since my business taxes are paid with my personal taxes, which checking account do I use to pay my business taxes? What about paying estimated taxes?
Answer:
A: First, let's look at the question of which account to use to pay business taxes at the time you file your business and personal tax return. Most small businesses file Schedule C for business taxes, and Schedule C is part of your personal tax return filing.
Paying for tax preparation can be divided easily between Schedule C and the personal tax return. Ask your tax preparer to divide your bill into two parts - one part for preparation of Schedule C and one part for preparation of your Form 1040. Then pay the Schedule C preparation bill with your business checking account and the bill for your personal tax return with a personal check.
Paying for Taxes Owed
This question is more difficult to answer when you must pay a tax bill, for income taxes and for self-employment taxes (Social Security and Medicare). This comes up most often in paying estimated taxes. The difficulty is in figuring out which entity (your business or your personal) is going to be deficient. If you commonly don't have to pay estimated taxes personally, and your business will show a profit this year, then you might want to pay your business taxes from your business checking account. Using your business checking account to pay estimated taxes for business profits leaves fewer questions for the IRS.
Which account to use to pay estimated business taxes might also be determined by your business type. For a sole proprietorship, it may not matter which checking account you use, but you don't want the IRS to question the separation of business and personal expenses. For LLC's and partnerships, use the business checking account unless you typically pay estimated taxes for your personal taxes. Check with your tax advisor before writing a check to pay your estimated taxes.
If you don't have a separate checking account for your business, you should seriously consider getting one. Read this article about why you should have separate business and personal checking accounts, then get that business account set up.
Q: Since my business taxes are paid with my personal taxes, which checking account do I use to pay my business taxes? What about paying estimated taxes?
Answer:
A: First, let's look at the question of which account to use to pay business taxes at the time you file your business and personal tax return. Most small businesses file Schedule C for business taxes, and Schedule C is part of your personal tax return filing.
Paying for tax preparation can be divided easily between Schedule C and the personal tax return. Ask your tax preparer to divide your bill into two parts - one part for preparation of Schedule C and one part for preparation of your Form 1040. Then pay the Schedule C preparation bill with your business checking account and the bill for your personal tax return with a personal check.
Paying for Taxes Owed
This question is more difficult to answer when you must pay a tax bill, for income taxes and for self-employment taxes (Social Security and Medicare). This comes up most often in paying estimated taxes. The difficulty is in figuring out which entity (your business or your personal) is going to be deficient. If you commonly don't have to pay estimated taxes personally, and your business will show a profit this year, then you might want to pay your business taxes from your business checking account. Using your business checking account to pay estimated taxes for business profits leaves fewer questions for the IRS.
Which account to use to pay estimated business taxes might also be determined by your business type. For a sole proprietorship, it may not matter which checking account you use, but you don't want the IRS to question the separation of business and personal expenses. For LLC's and partnerships, use the business checking account unless you typically pay estimated taxes for your personal taxes. Check with your tax advisor before writing a check to pay your estimated taxes.
If you don't have a separate checking account for your business, you should seriously consider getting one. Read this article about why you should have separate business and personal checking accounts, then get that business account set up.
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