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Jonathan Tierney
Jonathan Tierney, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 322
Experience:  Tax Accountant at Praxair, Inc.
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I have an S Corp. I am responsible the Company's profits

Customer Question

I have an S Corp. I am responsible for claiming the Company's profits therefore, claiming and paying the Federal Income tax. This year I took less wages, but the profits of the company will cause me to owe close to as much, as much, or more in Federal Income taxes. I therefore will not have as much paid in in Federal Taxes before year end therefore failing the 90 percent of current year or 110% of prior year paid in before year end. What do I do?
Submitted: 2 years ago.
Category: Tax
Expert:  Jonathan Tierney replied 2 years ago.

Hi, my name is ***** ***** my goal here is to provide you with the most complete and accurate answer possible.

You can pay yourself a bonus at the end of the year and elect to withhold almost all (you still have to withhold your share of FICA and Medicare taxes) of the bonus withheld in federal income taxes. Withholding is treated as being paid in four equal installments when an estimated tax penalty is calculating, so even though you were underpaid in the beginning of the year, withholding at the end of the year will catch you up on your payments.

Going forward, if you still do not want to take more wages, the only other way ensure you are fully paid in is to make estimated tax payments. However, since it sounds like you have not been making estimated payments, the only other way to catch up is through bonus withholding.

Any estimated tax penalty an also be reduced by annualizing your income. This method requires you to complete Form 2210 and calculate your federal income tax liability based upon your actual income, deductions, and credits for each quarter, so if you tax liability is skewed toward the end of the year, the estimated tax penalty will be reduced if not eliminated.

I hope this answers your question. Please let me know if I can clarify anything or answer any additional questions, and I would greatly appreciate positive feedback. Thanks, Jonathan