Strategies for Managing a Tax Bill
If you find yourself owing money to the IRS this tax season, rest assured that several options are available to manage your tax bill effectively. Below are some steps and strategies to consider, as well as ways we can work together to reduce your tax liability in the future.
Setting Up a Payment Plan with the IRS: The IRS offers installment agreements that allow you to pay your tax bill over time. This can be a good option if paying in full would strain your finances.
Important Note: Payment plans may include interest and fees but are less costly than ignoring the debt. Late payments can incur penalties of up to 0.5% of the unpaid amount per month, plus interest. Paying as much as you can by the tax deadline minimizes these costs.
Using Savings to Cover Taxes Owed: If you have cash reserves, using savings can help avoid potential penalties and interest charges. Before drawing from savings, consider your emergency fund and overall financial goals.
Reviewing Missed Deductions or Credits: It’s worth revisiting your return to ensure you haven’t overlooked deductions or credits that could lower the amount owed. Examples include education credits, medical expense deductions, or home office expenses (if applicable). If eligible deductions or credits are found, filing an amended return may reduce your tax liability.
Exploring Additional Options: Thoughtfully withdrawing from investments may be an option. We’ll want to discuss this, identify your best option, and weigh all your options appropriately before taking action.
Looking Ahead:
To help reduce your tax liability in the future, we can explore strategies such as:
- Maximizing retirement account contributions to reduce taxable income.
- Adjusting withholding or estimated payments to avoid surprises.
- Reviewing tax-efficient investment strategies.
- Optimizing charitable giving or other deductions.
If you owe taxes or have questions about the best approach for your situation, we’re here to help. Together, we can identify the best sources to fund your payment and develop a plan to manage your tax strategy. We have resources available to minimize tax liabilities and maximize your investment opportunities. Feel free to reach out to schedule a time to discuss your options. The best time to discuss this is early, while we have time to make necessary changes.
If you have friends or family who’ve been hit with a large tax bill this year, feel free to share this with them. And if they could use help with financial planning or lowering their tax liability, you’re welcome to pass along our information or introduce us:
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through The Musuneggi Financial Group, a registered investment advisor. The Musuneggi Financial Group and MFG Private Wealth are separate entities from LPL Financial. Tax preparation services offered through MFG Tax Services are separate and not affiliated with LPL Financial, LPL Financial does not offer tax advice or tax preparation services. Insurance products are offered through MFG Insurance Services or its licensed affiliates. MFG Insurance Services and its licensed affiliates are separate entities from and not affiliates of LPL Financial.
Team Spotlight – Rodney Deloe is now a Certified Exit Planning Advisor (CEPA®)
Big news— Rodney Deloe is now a Certified Exit Planning Advisor (CEPA®)!
Rodney has earned the CEPA® Certified Exit Planning Advisor designation through the Exit Planning Institute. This certification further equips him with advanced tools and strategies to help business owners build value, plan successful transitions, and create stronger outcomes for their companies and families.
Tax season doesn’t have to feel like a root canal!
– Rod W. Deloe, CPA
As a business owner, the “hand-off” to your tax preparer is the most critical moment of the year. Doing it right doesn’t just save your accountant’s sanity—it saves you money, reduces audit risks, and keeps your professional fees down.
Before you hit “send” on that folder of documents, here are the 5 things you should do to ensure a seamless filing:
1. Reconcile EVERYTHING 📂
Don’t let your preparer be the one to discover that your bank balance doesn’t match your books. Ensure every bank account, credit card, and loan statement is reconciled through December 31st. If the numbers don’t tie out now, they won’t tie out later.
2. Separate Personal from Business 🚫
If you accidentally put those grocery runs or family dinners on the business card, flag them now. Moving these to an “Owner’s Draw” or “Distribution” account before handing over your books saves your CPA from playing detective (and charging you for the time).
3. Review Your “Large” Purchases 🚜
Did you buy a new piece of equipment, a vehicle, or office furniture this year? Make sure you’ve set aside the actual invoices. Your preparer needs these to properly calculate depreciation and maximize your $Section 179$ or bonus depreciation deductions.
4. Categorize “Ask My Accountant” Entries ❓
We’ve all been there—you see a transaction from six months ago and have no clue what it was. Instead of leaving it blank or guessing, try to track down the receipt or add a memo. A clean ledger is a fast ledger.
5. Finalize Your 1099s 📝
Ensure you’ve collected W-9s from all your contractors and that your 1099s have been issued. Your tax preparer will need to check the “Yes” box on your return asking if you filed the required forms.
Pro-Tip: A “shoebox” of receipts is a recipe for a high bill. Digital organization is your best friend!
Business owners: What is the one thing you’ve started doing that made tax season easier for you? Let’s share some wisdom in the comments! 👇
#SmallBusinessTips #TaxSeason #Accounting #EntrepreneurLife #TaxPrep #BusinessOwne
The Clock is Ticking on Estimated Taxes: How to Pay Smart and Avoid Penalties
– Rod W. Deloe, CPA
Let’s face it: nobody wakes up excited to deal with taxes.
But if you are a freelancer, a small business owner, a side-hustler, or an investor, taxes aren’t just a once-a-year headache on April 15th. They are a year-round responsibility.
If you fall into one of these categories, you likely know the slight panic that sets in when a quarterly estimated tax deadline approaches. It’s easy to push it to the bottom of the to-do list, hoping to deal with it “later.”
Here is the reality check, delivered with tough love: Time is running out to get your strategy in order.
Ignoring estimated taxes doesn’t make them go away; it just makes them more expensive due to IRS underpayment penalties.
The good news? With a little proactive planning, you can manage these payments smartly, keep more of your hard-earned money, and sleep better at night.
Here is how to beat the clock and handle your estimated taxes like a pro.
The “Pay-As-You-Go” Reality
The U.S. tax system operates on a “pay-as-you-go” basis. Uncle Sam wants his cut as you earn the money, not just at the end of the year.
If you are a traditional W-2 employee, your employer handles this by withholding taxes from every paycheck. But if you are self-employed or have significant income where taxes aren’t withheld (like dividends or capital gains), the burden shifts to you to act as your own payroll department.
Why the Urgency? The Penalty Trap.
Why is the theme of this article “time is running out”? Because the IRS doesn’t just want their money; they want it on time.
If you fail to pay enough tax throughout the year through withholding or estimated tax payments, you may have to pay a penalty for underpayment of estimated tax.
Think of this penalty as high-interest debt you owe the IRS. It is completely wasted money that you could have kept in your pocket simply by paying on schedule. The longer you wait, the more it could cost you.
How to Pay Smartly (And Safely)
Calculating exactly how much you will owe in April when you are only halfway through the year can feel like gazing into a foggy crystal ball.
Fortunately, you don’t have to be perfect. You just need to use the IRS “Safe Harbor” rules.
The Golden Rule of Safe Harbor Generally, you can avoid an underpayment penalty if your total tax payments through the year equal at least:
- 90% of the tax to be shown on your current year’s tax return, OR
- 100% of the tax shown on your previous year’s return (this jumps to 110% if your adjusted gross income on that previous return was more than $150,000, or $75,000 if married filing separately).
The Smart Strategy: For many business owners whose income fluctuates wildly, Option #2 (the prior-year safe harbor) is the least stressful method. You know exactly what you owed last year. Divide that number by four, send in those quarterly payments, and you are generally “safe” from penalties, even if you have a banner year and owe more next April.
Don’t Hit Snooze on These Dates
Mark these handy—if dreaded—deadlines on your calendar. If these dates fall on a weekend or holiday, the deadline is usually the next business day.
- April 15: Payment for Jan 1 – March 31 income.
- June 15: Payment for April 1 – May 31 income.
- September 15: Payment for June 1 – Aug 31 income.
- January 15 (of the following year): Payment for Sept 1 – Dec 31 income.
The Final Takeaway
The clock is always ticking toward the next quarterly deadline. Hiding from it won’t help, but taking action today will.
Set aside a percentage of every invoice you receive into a separate savings account designated for taxes. Use accounting software (like QuickBooks, Xero, or FreshBooks) to keep your books up to date so you aren’t guessing your income numbers right before the deadline.
Don’t let penalties eat into your profits. Take control of the clock, make your payments, and get back to doing the work you love.
Tax laws are complex and subject to change. This article is for informational purposes only and should not be taken as specific tax advice. Always consult with a qualified tax advisor regarding your individual situation.