Business owners have an IRS payment coming due well before April federal income tax deadline

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Business owners have a big IRS payment coming due well before April tax deadline

Small businesses that took advantage of pandemic-related provisions in 2020 by deferring some of their Social Security taxes have to pay back the rest by Jan. 3, 2023.

While there aren't that many tax changes that will affect small businesses in the upcoming tax season, what is new — coupled with evergreen tax issues that tend to trip up small businesses — could cause headaches if owners aren't careful. The IRS has been sending out notices reminding business owners to pay what they owe by the due date, but still it's something that can easily fall through the cracks, especially if owners aren't paying careful attention, said Eric Bronnenkant, head of tax at Betterment and an adjunct professor of taxation at Seton Hall University.Expect a new tax form related to Venmo, PayPal income

He also suggests owners check to ensure that all of the payments on the 1099-K form are actually for goods and services, as opposed to a gift from a friend that was mischaracterized. "You shouldn't have to pay taxes on it just because someone issued you a 1099-K with erroneous information," Bronnenkant said.Many owners don't think to draw a hard line between business and personal income and expenses, but this can be a big mistake.

"It's hard to get these penalties abated and penalties are nondeductible so it comes right out of the bottom line," Sprong said.

 

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