One of the toughest aspects of running a business is surfing the cashflow tide. The tide comes in and the tide goes out. It is so tempting when facing a cash crunch to delay the payment of your tax obligations. It’s the quickest way to dig that proverbial hole to China.
There's no loan application or approval process. It's quick and easy, that is until those obligations come due because you've received a collection notice from the IRS.
A business must electronically remit their payroll tax obligations through EFTPS. There are significant penalties for not paying on time:
2% within 5 days late
5% from 5 to 15 days late
10% more than 15 days
15% if not paid within 10 days after the first delinquency penalty.
What can you do to ensure that you’ve got the money set aside to pay the taxes when they come due? This is a cash management strategy that goes by several names – the envelope method, mason jar accounting, or Profit First. Regardless of its name, the idea is simple. Open another bank account so that as you receive money for your goods and services you automatically set aside what is needed to meet your tax obligations.
Stay on top of your payroll tax compliance. If you’re a facing cash crunch, call me before you decide to not pay your payroll taxes on time!