Paying taxes on S corp distributions.

[DrGuch]

Need some input here. So I have an S corp wherein I'm the only owner/employee/shareholder. Normally I pay federal and state taxes on my estimated year-end shareholder distribution by paying extra federal and state taxes out of my quarterly payroll. Unexpectedly, I am receiving a large bonus before year-end from our partnership and my usual salary for myself for the 4th quarter would not be enough to cover these taxes. If I wanted to keep my salary for the 4th quarter the same, what are my options for paying federal/state taxes on the bonus/additional S corp distributions? Would there be a specific form that I would have to file?

Yes I know, I should have an accountant, and I'm still working on it. But for now, I don't, so any input would help. Thanks in advance!

[jacoavlu]

It’s easy to make an estimated tax payment on IRS website

do you know what your safe harbor number is to avoid penalty?

[DrGuch]

I haven't calculated the safe harbor number, I can't even remember how to compute it. Isn't it like as long as I pay 100% of last year's taxes, I don't get a penalty? Anyway, that is a good point, I'll look it up.

Anyway, I was thinking of just paying up, I'll get the refund back anyway in a few months if I overpay.

If I make an estimated tax payment though, doesn't that mean I'll end up paying self-employement taxes on that income? I was hoping to avoid paying payroll taxes on the extra income.

Thanks for the quick response btw.

[CordMcNally]

I haven't calculated the safe harbor number, I can't even remember how to compute it. Isn't it like as long as I pay 100% of last year's taxes, I don't get a penalty? Anyway, that is a good point, I'll look it up.

110% if your AGI is >$150k.

[DrGuch]

thanks CordMcNally.

[jacoavlu]

I haven't calculated the safe harbor number, I can't even remember how to compute it. Isn't it like as long as I pay 100% of last year's taxes, I don't get a penalty? Anyway, that is a good point, I'll look it up.

Anyway, I was thinking of just paying up, I'll get the refund back anyway in a few months if I overpay.

If I make an estimated tax payment though, doesn't that mean I'll end up paying self-employement taxes on that income? I was hoping to avoid paying payroll taxes on the extra income.

Thanks for the quick response btw.

No making a tax deposit on line doesn’t change the form of the income

calculate safe harbor

if you can have that much withheld from payroll by 12/31 then all is good. Just pay balance due 4/15

Your goal is to avoid penalty and not add complexity with extra payments

[DrGuch]

I guess I really can just pay estimated taxes on the extra income. Didn't realize it was that simple. Thought there were more forms to file.

But yes, I will calculate the safe harbor as you suggest, looks like I might not need to pay extra as I'm reading it after all.

Thanks for this jacoavlu, super helpful !

[tailwind225]

It’s easy to make an estimated tax payment on IRS website

do you know what your safe harbor number is to avoid penalty?

I also did not realize it was this easy. I just found the website now. So just to make sure, the payment type would be "estimated taxes" and where it asks "apply payment to" I would choose form 1040? I should be within safe harbor based on payroll deductions but would like to go ahead and pay my expected taxes now if I can just do it this way.

[jacoavlu]

I also did not realize it was this easy. I just found the website now. So just to make sure, the payment type would be "estimated taxes" and where it asks "apply payment to" I would choose form 1040? I should be within safe harbor based on payroll deductions but would like to go ahead and pay my expected taxes now if I can just do it this way.

1 yes. Choose correct tax year

2 why. Do you like giving the gov a zero interest loan?

[spiritrider]

Be aware that a safe harbor paid by a 4th quarter estimated tax payment does not necessarily exempt you from quarterly underpayment penalties. However, if you file Form 2210 after making a 4th quarter estimated tax payment for 4th quarter income. There will be no penalties.