next year, by bunching expenses into 2022, then you can gain a greater advantage from deducting the expense from revenues earned this year.In mid-January, you’ll have to pay estimated taxes for the fourth quarter. This offers a good time to assess your year to determine what you should pay in estimated taxes, reducing any surprises come Tax Day.
If, instead, profits fell, then you may only need to pre-pay 90% of the current year’s total tax liability in estimated taxes. You can choose to pre-pay the lowest amount, among these three estimated payment options. But to pay 90% of current estimated taxes requires understanding what your total liability will be in 2022. If your estimated taxes were based on higher profit levels from 2021, then it’s possible that you’ve paid enough in estimated taxes already.
Say as a solo practitioner computer engineer contractor, you make $200,000 in 2022. If you elect to be taxed as a sole practitioner, then you will have to pay the self-employment tax on the $200,000 . But if you choose the S-Corp design, then you can give yourself a salary of, say, $125,000 if that’s reasonable for the profession and distribute $75,000 in profits to yourself as owner of the business.
Beyond the goal of simply giving for a good cause, charitable giving can be powerful to ensure you increase the amount you’re deducting to go beyond the standard deduction. With it more difficult to itemize deductions – most business expenses are taken out earlier in the tax calculation, prior to itemized deductions – charitable gifts can be used to increase the amount.