What are Estimated Tax Penalties and 
How Can I Avoid Them?

Individuals who are self-employed will be all too familiar with estimated tax penalties which may crop up in the instance that you have under-payed your tax obligation. The good news is that, in most cases, these estimated tax penalties can be easily avoided, even if you have severely underestimated the amount of money that you owe the IRS. Here is what you need to know.

avoid estimated tax penalties

How to avoid estimated tax and under-payment penalties

There are a handful of different ways to avoid having to pay any estimated tax and under-payment penalties. They are as follows:

You can avoid estimated tax penalties if you can prove that you were unable to make the required payment due to an extenuating circumstance over which you had no control. This circumstance could have been a “casualty event, disaster, or other unusual circumstance and it would be inequitable to impose the penalty”, according to the IRS.

You can avoid estimated tax penalties if you owe less than $1,000.

You can avoid estimated tax penalties as long as you pay a minimum of 90% of your tax obligation.

You can avoid estimated tax penalties if you pay at least 100% of the tax owed in the prior year.

You can avoid estimated tax penalties if you became disabled during the course of the current tax year or during the tax year before for which you should have made estimated payments.

Ultimately, the easiest way in which to avoid incurring estimated tax or under-payment penalties is to ensure that you make accurate estimated payments. While it is impossible to predict exactly what you will owe, it is possible to get a closer estimate. A good rule of thumb is to examine what you owed in tax payments in the previous tax year and make four equal payments which total at least 10% more than that amount.

Need help with your estimated payments or with filing your taxes? The CPA specialists at Georgen Scarborough Associates, PC are here to assist. Contact us today for further information regarding our services.

Tax Planning Tips for Small Businesses in the U.S.

Tax-preparation, CPA, tax advisor

Tax planning is essential for all businesses in the U.S. in order to ensure compliance and avoid hefty penalties. Remember, tax planning is not the same as tax-preparation (which is obviously just as important). Tax planning refers to the process of strategizing in terms of exactly what needs to be filed and which records need to be retained, as well as what deductions can be taken advantage of and which credits can be incurred. Tax-preparation, on the other hand, refers to the process of arranging your taxes for annual filings. 

With that in mind, here are a few helpful tax planning tips for small businesses, courtesy of Georgen Scarborough Associates. 

Seek out Assistance 

As the owner of a small business, you probably have a finger in every pie. In short, you have a lot on your plate and probably will not have enough time to dedicate toward the management of the financial aspect of your business. This is why it is strongly advised to partner with a tax advisor or CPA who can take over in this regard and assist in reducing the tax burden. 

Stay on Top of Deductions 

Make the most of the deductions available to you by ensuring that you keep detailed records of all related and relevant business expenses for audit purposes. You will need to hold on to the original vendor invoices and other receipts to prove that the expenses were made for business purposes, and not for personal gain. Bank statements will rarely suffice. 

Keep up to Date with Tax Law Changes

Tax laws are changing all the time! So, it is essential that small business owners keep abreast of how and when these changes are taking place – even if you work with a tax advisor. The IRS website is a wonderful resource for this kind of information. 

Looking for CPAs that you can count on for optimized tax planning? Look no further than the experts at Georgen Scarborough Associates. Contact us today. 

Tax Preparation Tips for Small Businesses

Tax tips for businesses

Do you own a small business? Trying to educate yourself in terms of how to prepare for the tax season? If so, you are also probably asking yourself a number of questions, such as whether or not you should try to handle all of your tax-related matters yourself as well as how can you reduce your company’s chances of being audited by the IRS? Here are some tax preparation tips for small businesses to help you on your way.

Make the Most of It

It is possible to really take advantage of your tax deductions and credits if you make the effort to keep track of them throughout the year. Deductions that you can take into account include items like business furniture, supplies for the office, and start-up expenses.


You will quickly come to find that keeping track of all the necessary numbers and information necessary for small business tax is time-consuming and demanding. This is why it can be a much better idea to invest in software to do it for you. There is also an array of useful apps available for a fraction of the cost, which can also help to streamline these processes.

Research the Forms

There are a lot of different tax-related forms that you should familiarize yourself with upon first starting your small business. Doing so will save you a lot of time in the future! Most importantly, you’ll want to know which ones are relevant to your business based on its type. For example, sole proprietors will need to attach a Schedule C to their personal income tax return, while corporations will need to use a Form 1120 or 1120S.

Looking for professional assistance when it comes to tax requirements for your small business? Look no further than the experts at Georgen Scarborough Associates PC. Contact us for more details today.

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