I’ve been a fan of Randy Crabtree’s Unique CPA podcast for a while, and though we’ve run across each other at accounting technology conferences here and there, I had no idea that he was so committed to our industry as to hold an entire in-person event for us! The upcoming “Bridging The Gap” conference will be held right near Chicago’s O’Hare International Airport, and promises two full days of education and networking (plus an optional pre-conference).
Randy’s conference has been virtual the past two years, and this is the first time it’s being held in-person. The focus is on bringing a fresh focus to work-life balance and how it relates to making us better professionals and people. The emphasis on physical and mental health truly makes this a unique conference in the accounting world. I think this was the claim that got me to click the sign-up button:
And even better… you can use code BTG23RTDISC for $150 off the In-Person Conference ticket!
Just to be clear — I’m not being paid to promote this conference… any of our regular readers already knows that I’m passionate about education and community. Realizing that there’s yet one more opportunity to find both at this under-promoted conference motivated me to share — to make sure that my colleagues know not to miss it. Register here and join me August 29-30. Leave a note in the comments if you’ll be there and we’ll try to connect!
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
It’s been almost a year since our shindig with the Logan Square Chamber of Commerce, clients, and friends — celebrating 21 years of working with small businesses in our community. Today we celebrate our 22nd trip around the sun in this amazing neighborhood, and it’s high time we share all those great memories of the blow-out party that was.
Gratitude also goes out to cherished long-time client Vinejoy for the prosecco, Revolution Brewing for the beer, SipJeng for the CBD mocktails, Dill Pickle Food Co-op for the soft drinks, and the amazing Nick Connell for the balloon twisting and general merriment. We couldn’t have done any of this without the dedicated help of Sage Ferguson and her family, as well as the enthusiastic Candy Minx.
Most importantly, we have to thank our entertainers for the event: the best honky-tonk band in Chicago, if not the world — Wild Earp & The Free-For-Alls, with special guest Michelle Billingsley. We are indebted to them for their spirit, talent, charm, camaraderie, generosity — and patience, as the Chamber dealt with power and light challenges at the newly-activated Solidarity Triangle.
Speaking of the Logan Square Chamber of Commerce — this whole crazy event was dreamed up by their energetic Executive Director, who also invited our wonderful drink and food pop-ups, and we were touched that the two previous directors of the Chamber also attended (wish I’d thought to get a photo of all three of them together)! What an honor. Our neighborhood owes so much to LSCC, as well as their incredible Farmers Market.
I could go on and on about what an incredible celebration it was — pretty sure I floated on Cloud Nine for weeks afterwards. Suffice it to say that having hundreds of clients, community members, friends and neighbors come together to commemorate the difference we’ve made together… feels really great. Thank you for letting us be a part of your neighborhood.
Nancy modeling at the Beehive In Bloom Fashion Show | photo by Zak Jacobson
It’s not often I am described as either brilliant or insightful — so it’s a banner day when referred to as both.
And what better day than today, the 22nd anniversary of starting my own accounting firm?
To celebrate, I am delighted to share a recent interview with CanvasRebel, an online magazine and podcast that highlights voices of small business owners — in their words, “stories about our business or career that we might share at dinner or over coffee, but that wouldn’t necessarily make it into our memoir at the end of our lives; stories that illustrate the nitty-gritty details of what it takes to be successful day to day, how to build and grow a client base, recruit, train and manage a team or generate a living.”
I agree wholeheartedly with the folks who interviewed me. “There is so much we can learn from each other, and we hope these stories inspire you to pursue your passion and support those who are doing so themselves.”
Their questions were thought-provoking and caused me to truly reflect and think about some of the universal truths that I’ve learned in working with small business owners as their CPA. Questions such as:
What’s the best advice you’ve ever given to a client?
How did you get to where you are today?
What do you think helped you build your reputation within your market?
Do you have any insights you can share related to maintaining high team morale?
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
Chicago Office Of Labor Standards Minimum Wage Chart
The City of Chicago and Cook County both saw increases to their minimum wage requirements as of July 1, 2023 (they have fiscal years that end June 30, which is why we see their updates at this time each year, rather than January 1, which is when the State of Illinois changes usually go into effect). Since reaching $15 per hour in 2021, the minimum wage for Chicago increases annually per ordinance according to the Consumer Price Index, or 2.5%, whichever is lower.
In Chicago, minimum wage will increase to $15.80/hr for “large” employers (21 or more employees) and domestic workers. The minimum will be $15/hr for “small” employers (4-20 employees). For tipped workers, who tend to earn a large portion of their pay from gratuities, the minimum wage is going up to $9.48/hr for large employers, and $9/hr for small. (Efforts to eliminate this practice are yet again gaining momentum under the new mayor.) As has always been the case, if tips do not bring the worker up to the non-tipped employee minimums, the employer must make up the difference. Most payroll software (including Gusto) will address this discrepancy automatically, but it’s worth checking your system to make sure.
The overtime minimum wage for non-tipped employees is calculated at 1.5 times the minimum wage. The overtime wage for tipped Employees is calculated at 1.5 times the tipped minimum wage, minus no more than the current maximum tip allowance. The maximum tip allowance is calculated by subtracting the tipped minimum wage from the regular minimum wage. Therefore, in Chicago, overtime minimum wages will increase to $23.70 and $22.50, respectively.
Rates for “youth” workers in Chicago — those under age 18, in a subsidized temporary youth employment program, or transitional employment program — are now $13.50/hr for regular pay, $20.25 for overtime, and $8.10 for tipped workers.
In addition, the minimum wage to be paid under City of Chicago contracts or concessionaire agreements is increasing from $16.00 to $16.80 per hour for non-tipped employees and from $8.20 to $8.80 per hour for tipped employees.
Chicago’s Minimum Wage and Paid Sick Leave Ordinance guarantees a minimum wage for employees working more than 2 hours in any 2-week period in Chicago for an employer with four or more workers. Domestic workers are guaranteed Chicago’s “large” employer minimum wage irrespective of the number of workers.
Employers must provide the Minimum Wage and Paid Sick Leave notice to all covered employees with their first paycheck, as well as in communal areas at a workplace. Notices must be provided in English and any language spoken by employees that do not speak English proficiently, if a notice in that language has been provided by the Department of Business Affairs and Consumer Protection on the Office of Labor Standards website. Notices can be provided electronically.
Parts of Cook County that are not in Chicago, and for which the municipality did not “opt out”, allow lower rates than Chicago ($13.70/hr regular pay and $8/hr for tipped workers), but require higher hourly pay than the State of Illinois ($13/hr regular pay and $7.80 tipped workers).
The federal minimum wage, which was last raised in 2009, stands at $7.25 an hour, which when adjusted for inflation is the lowest in 66 years.
Reactions to increased minimum wages by small business owners are understandably mixed. On the one hand, higher wages often help the local economy and boost consumer spending power. On the other, many small businesses owners operate on slim margins and make far less per hour than their employees. An increase in the minimum wage often means that some staff hours are reduced or eliminated in order to stay in the black.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
QuickBooks ProAdvisors are first nominated, and then go through a lengthy vetting process, before eventually opening up to a public vote. Applicants for this prestigious award are ranked based on their performance across various categories, measuring everything from QuickBooks knowledge and continuing education, to utilizing the best tools and partner apps within the QuickBooks ecosystem. Real-world experience with clients is a requirement. Winners have said the Top 100 recognition by peers and their industry has opened doors and provided inspiration and new perspectives.
I would love to express great appreciation to Gary DeHart and the entire Insightful Accountant team for their hard work evaluating the nominees — it’s quite special to receive an award from a publication that has been a trusted go-to resource for so many years. And special thanks to all those who voted, in particular my esteemed colleagues and valued clients. It’s extremely exciting to share space with luminaries in the Intuit QuickBooks world such as Alicia Katz Pollock, Lynda Artesani, Michelle Long, Caleb Jenkins, Marnie Stretch, Stacey Byrne, and Veronica Wasek. Looking forward to the formal announcement at Scaling New Heights. If you see me there, please come on up and introduce yourself!
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
Chase Bank seems to be having issues today… many small business owners have reported seeing duplicate Zelle notices, but it turns out: those aren’t just duplicate notices. Chase is actually taking the money out twice!
From Chase —- We’re sorry that some customers are seeing duplicate transactions and fees on their checking account. We’re working to automatically reverse any duplicates and adjust any related fees. 6/2/2023 11:59:40 AM ET
Chase banner notice as of June 2, 2023
Our professional advice to clients? Let’s just all take a deep breath and hope Chase fixes everything by Monday. Meanwhile and most importantly — make sure anyone who gets a duplicate payment knows that the second one will be reversed soon, and conversely, that any duplicate payments you receive are likely to be pulled back out momentarily.
This will also complicate small business owners’ QuickBooks bank feed this month, with a lot of duplicate transactions, duplicate reversals, fees and fee reversals… let’s wait until the dust settles and then decide how to handle them all. Generally, if you go ahead and accept them to the place where they would normally be categorized, then make sure to accept the reversal to the same category.
Please spread the word to other Chase users.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
I used to find it annoying when a client would forward me an article about a tax deduction or credit, to make sure I would take it on their tax return. But even though I take approximately 70 credit hours of continuing education each year (almost twice the requirement for Illinois CPAs), every once-in-a-while a new tax law falls between the cracks, or I might not realize a given client is suddenly eligible for an old one. So, while 99% of these shares are “old news”, it’s worth avoiding the eye roll and taking a look just in case. Out with the ego, in with the knowledge.
To that end, when you do share something with your tax preparer, I beg you to phrase it in respectful language that recognizes they are experts in their field. Examples: “I’m sure you already know about this but just wanted to play it safe,” or “I read about this new tax law and am constantly amazed at how much y’all have to keep up with; any chance this applies to my situation?”
There are five tax benefits I’ve noticed — in my interactions with colleagues at conferences, in webinar chat, or in our online communities — that seem to keep flying under the radar. Most likely the tax preparer is expecting the bookkeeper or taxpayer to bring it up if one of these situations exists, but they may not know it’s significant, and may forget to note it in the books or tax organizer. So, to make sure we’re all on the same page, here are a few choice tax benefits that are often overlooked.
Credit for Small Employer Retirement Plan Startup Costs
Credit for Small Employer Retirement Plan Startup Costs — SECURE 2.0 gets most of the airtime these days, but back in late 2019, the original version of this law passed, making it easier for small business owners to set up “safe harbor” retirement plans that are less expensive and easier to administer, and made them accessible to a wider range of employees. Although many of these benefits were modified and expanded upon with SECURE 2.0, the new rules didn’t take effect until 2023. But that shouldn’t stop you (or your preparer) from taking a look at the benefits in place in 2022. For starters, Form 8881, Credit for Small Employer Pension Plan Startup Costs provides for a maximum tax credit of up to $500 per year for startup costs, and another $500 per year to employers who create a 401(k) or SIMPLE IRA plan with automatic enrollment. This benefit is a win-win for employers and employees, especially when the employee additionally qualifies for the retirement savers’ credit.
Employer Credit for Paid Family and Medical Leave — Effective starting 2018, the Section 45S Employer Credit for Paid Family and Medical Leave is designed to cover up to 25% of the cost to employers of providing paid family and medical leave to their staff. The FMLA credit is claimed on Form 8994, Employer Credit for Paid Family and Medical Leave. To qualify, employers must have a written policy providing all eligible employees access to at least two weeks of paid family and medical leave annually, paid at 50% or more of normal wages (yes, short-term disability policies often count).
Policies must also include leave that covers one or more of the following: – Birth of a child – Adoption or fostering of a child – Care for a spouse or family member with a serious health condition – Employee’s own serious health condition – Spouses and family member of certain active military members
Employers can claim the credit for up to 12 weeks of paid leave benefits. It’s available through 2025 and the IRS has an FAQ on it that’s chock-full of details.
Restaurant Meal 100% Deduction — For 2021 and 2022 only, businesses can deduct the full cost of business-related food and beverages purchased from a restaurant; the limit is usually 50% of the meal, so this can be quite a savings. For our own clients, we’re simply exporting the entire “Meals” category from their financial software and reviewing all payees, sorting out the ones that are not restaurants… yet another benefit for small business owners who heed our cry to “please add payees to all transactions”.
Per the IRS, to qualify for the enhanced deduction: – The business owner or an employee of the business must be present when food or beverages are provided. – Meals must be from restaurants, which includes businesses that prepare and sell food or beverages to retail customers for immediate on-premises or off-premises consumption. – Payment or billing for the food and beverages occurs after December 31, 2020, and before January 1, 2023. – The expense cannot be lavish or extravagant. – Grocery stores, convenience stores and other businesses that mostly sell pre-packaged goods not for immediate consumption, do not qualify as restaurants.
Self-Employed Health Insurance Deduction — Now, this may sound obvious, since almost everyone knows that self-employed people are generally allowed to deduct their health insurance premiums for themselves, their spouses, and their dependents (and in some cases, non-dependent children). Yet we often see this benefit overlooked on tax returns, especially when S-Corp shareholders pay for their insurance through work. There are special and complex rules regarding how this health insurance deduction is claimed, which I suspect is why it is often missed (or sometimes duplicated). It’s important to understand that this is not a business deduction; neither do you have to itemize to take it. The deduction is claimed as a reduction of taxable income, and applies only to income taxes, not to self-employment taxes. It also needs to be subtracted from Section 199A Qualified Business Income before calculating the QBI Deduction, and there are complex issues when it interacts with the Premium Tax Credit (see below), so keep an eye out for these potential issues when claiming this important tax benefit.
Premium Tax Credit — This one is often overlooked on tax returns in more than one direction… often the client forgets to provide Form 1095-A (Marketplace Health Insurance) to their preparer, which shows the advance premium tax credit, and therefore any increase or decrease in the credit based on the current year’s income is missed. How does this happen? Well, the credit is based on the prior tax year’s income, but “reconciled” on the tax return against the current tax year’s income — therefore, if the taxpayer had a good year, they may lose most or all of their credit. By contrast, in more difficult times, they may find out on the return that they’re entitled to more of a credit than they received. Not everyone enrolled on the Marketplace is eligible for a credit, so it’s easy to miss in the long list of tax organizer questions if the client doesn’t know to ask or to submit the form.
Per the IRS: If you benefit from advance payments of the premium tax credit, it is important to report life changes to the Marketplace as they happen throughout the year. Certain changes to your household, income or family size may affect the amount of your premium tax credit. These changes can alter your tax refund, or cause you to owe tax. Reporting these changes promptly will help you get the proper type and amount of financial assistance. For more information, see Claiming the Credit and Reconciling Advance Credit Payments.
To be fair to tax preparers everywhere, there is far more in the Internal Revenue Code (IRC) than any one person could ever know, which is part of why CPAs are required in most states to obtain more continuing education credits than almost any other professional designation. (Though keep in mind — there is no requirement that a tax preparer be a CPA, or even an EA. See here for my guide to finding a qualified tax preparer in your area.) The past five years have seen unprecedented increases in tax law complexity, and quite frankly — it’s hard to keep it all straight. So if you’re concerned your tax preparer is missing something, please approach the matter with respect and deference, and do not judge too harshly if they happen to have missed something. Just be glad you read this article and caught it in time! (And if you didn’t catch it in time, ask them about filing an amendment.)
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
It’s that time again… Tax Day is upon us and millions of taxpayers will need to have their returns extended for various reasons. What does this mean? The AICPA has released a “Tax Extension FAQ” for CPA members to share with their clients.
What does filing an “extension” do?
• An extension is a form filed with the IRS to request additional time to file your federal tax return. This extends the due date for submitting your individual return to October 15. • In some states, filing an extension with the IRS will automatically extend the time to complete a state income tax return. My note: In others, you must file a state extension. In still others, you must make a payment as your extension. • Filing an extension grants you additional time to submit your complete and accurate return, but you still need to estimate whether you will owe any taxes and pay that estimated balance by the original due date. • Extending your return allows you and your CPA more time to prepare your tax return to ensure the filing of an accurate tax return. In many cases, you may still be waiting for additional information (e.g., Schedules K-1, corrected Forms 1099, etc.) to complete your return.
Why does my CPA suggest we extend my tax return?
• If your CPA has recommended that you file an extension, it may be due to many reasons, such as: – The volume of data or complexity of certain transactions (e.g., sale of a rental property) on your return requires additional time. – The amount of time remaining in filing season is limited for the CPA to complete client returns by the due date* due to late-arriving information. – My note: Your small business accounting file needs to be tied out to source documents and all adjustments booked before we will finalize a return, and there may be delays in this process due to a variety of issues. • Many CPAs have a “cutoff” or deadline for clients submitting their tax information so they can plan their workload to ensure all client returns and extensions are completed by the due date. • Your CPA may suggest filing an extension if there are aspects of your return affected by pending guidance or legislation.
Am I more likely to be audited if I extend?
• Extending will NOT increase your likelihood of being audited by the IRS. • It is better to file an extension than to file a return that is incomplete or that you have not had time to carefully review before signing.
What are the primary benefits of extending my tax return?
• It provides for additional time to file returns without penalty when you are waiting for missing information or tax documents (such as corrected Forms 1099). Just remember that an extension provides additional time to file, but not additional time to pay. Penalties may be assessed if sufficient payment is not remitted with the extension. • You may qualify for additional retirement planning opportunities or additional time to fund certain types of retirement plans (e.g., SEP IRA). • It is often less expensive (and easier) to file an extension rather than rushing and possibly needing to amend your return later.
Should I do anything differently if I am filing an extension or “going on extension?”
• No, you still should give your CPA whatever information you have as early as possible or as soon as it becomes available. • Expect to pay any anticipated taxes owed by the due date.* You still need to submit all available tax information to your CPA promptly so they can determine if you will have a balance due or if you can expect a refund. • If you are required to make quarterly estimated tax payments, individual first quarter estimated tax payments are due on the same day as annual taxes. Your CPA may recommend that you pay the balance due for last year and your first quarter estimated tax payment for this year with your extension. • If you are anticipating a large refund, your CPA will likely try to get your extended return completed as soon as possible once all tax information is available. Your CPA may also want to discuss tax planning opportunities with you so that, in future years, you don’t give the IRS an interest-free loan.
My note: I’d like to add that we take filing extensions for our clients very seriously. We collect as much information as we possibly can about the year’s taxable income and deductions, extrapolate based on information from the prior year, and build a complete tax return — filling in estimates where needed. This way, we get as accurate a picture as we can so as to project how much might be owed to the tax agencies. We do our best, although it’s not perfect, and as a result, much more work is involved in putting together an extension than most folks might think.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
There are multiple options for paying personal quarterly estimated taxes. You can: have your tax preparer create vouchers that you then print and mail with a check; prepare your own vouchers for the IRS and IL DoR; or pay online.
Since March 2020, agencies have had so many challenges with paper-mailed checks and vouchers that we are encouraging everyone to make all tax payments online.
The due dates for estimated quarterly taxes are approximately: 1Q: April 15 2Q: June 15 3Q: September 15 4Q: January 15 — however for state taxes, especially for cash-basis filers and those in states with PTE tax, we recommend making the final payment by December 31st.
For the Illinois Department of Revenue (IDOR), go to the MyTax Illinois site. If you already have an account for sales taxes or another reason — do not log in, unless you are making business tax payments. Then click the “> Make an IL-1040, IL-1040-ES, or IL-505-I payment” link (see screenshot above).
Next, follow the instructions for making a quarterly estimated tax payment; it will make you enter your personal information (SSN, etc.) and ask you what kind of tax payment you wish to make.
It may require you to enter your driver’s license information or your AGI from a past tax return to confirm identity and get your IL-PIN.
Then it will take you to a Payment Information page.
You’ll want to select “IL-1040 Estimated Payment” and enter your tax year. Make sure it’s for the correct year and quarter — this is very important. The example below is for the fourth quarter of 2021.
Then, enter your payment information and click the Submit button.
It will require you to enter and confirm your email address before clicking OK.
Make sure to print the confirmation screen, even though they will send you an email receipt — every once-in-a-while IDOR fails to push the request through, and the amount is not debited or recorded. If you have the print-screen, you can prove you attempted to pay it on-time and that the mistake was theirs.
It will also include a confirmation code, the date/time of the request, the reporting period and amount, and bank withdrawal information. You can click “Printable Confirmation” or just print the webpage to pdf.
Please make sure to note how much you paid to each agency and on which dates — and let your tax preparer know this information as well. Securely uploading copies of the final confirmation screen to your tax preparer or bookkeeper is a great practice, so they can easily store the info in your file.
And if you use QuickBooks or another bookkeeping program, please make sure to enter the quarter, year, and “estimated tax” so that you or your bookkeeper or accountant or tax preparer can make sure it’s applied to the correct year, and for the right type of tax.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
There are multiple options for paying personal quarterly estimated taxes. You can: have your tax preparer create vouchers that you then print and mail with a check; prepare your own vouchers and do the same; or pay online.
Since March 2020, the IRS, USPS, and state revenue agencies have had so many challenges with mailed paper checks and vouchers that we strongly encourage everyone to make all tax payments online.
If you want to pay your federal estimated taxes online, the easiest way is to use IRS Direct Pay. Paying online offers confirmation that the payment made it to the agency, reducing the chance of issues down the road, especially if the check is lost in the mail or routed incorrectly in the processing department. It also allows taxpayers to be very clear about what type of tax and tax period are being submitted, again eliminating confusion on the part of the agency and preventing future problems.
Pro Tip: if you have questions about estimated taxes — what they are, whether or not you need to pay them, and how to calculate them — I recommend this great YouTube primer by my colleague, Hannah Smolinski of Clara CFO. It can easily be as much as 20-30% of each freelance check you take home, so get on top of this now… don’t wait until the money’s already been spent.
The due dates for estimated quarterly taxes are approximately: 1Q: April 15 2Q: June 15 3Q: September 15 4Q: January 15 — however for state taxes, especially for cash-basis filers and those in states with PTE tax, we recommend making the final payment by December 31st.
If you are paying online, I recommend making payments one day before the due dates, as sometimes it takes a day for the agencies’ systems to process payments due to overnight automated workflows. The funds are usually pulled from your bank account the same day or one day later, so there is very little wiggle room. This organization will actually send you reminder emails for each payment!
The great news is that you do not need to have an account with the IRS in order to make payments using Direct Pay.
Internal Revenue Service (IRS)
For the IRS, once you get to the Direct Pay site, select the following options (noted in the screen shot below): 1) the reason for the payment; 2) the form you would be mailing in if you weren’t doing this online; and 3) the year to which the payment should apply. For example, for 1st-quarter 2023 personal estimated taxes, you’d select the following:
IRS “Direct Pay” Step 1 of 5.
Pro Tip: you don’t have to wait until the due date for each quarter to make quarterly estimated tax payments! You can pay as early as you like. And if cash flow is a challenge, a great hack is to take the total tax payments required for the year and make monthly or bi-weekly — or even weekly — payments online. (Another trick is to increase tax withholding from your other sources of income, but not everyone has a W-2 job, and not all retirement companies will do that.)
There are many possible reasons for payment — such as extensions, balances due on a filed return, installment payments, amended returns, and so on. The IRS offers a list in their dropdown. For the purposes of this article, we’re focusing on quarterly estimated tax payments.
IRS “Direct Pay” List of Payment Reasons.
It’s extremely important that you select the correct year for payment. The IRS will levy late penalties and interest if you pick the wrong year, and the amount of time and effort that goes into contacting them and getting payments reapplied to the correct year will often cost more for your tax preparer’s time than filing your return in the first place. So keep in mind that the current year is usually the one you want for estimated tax payments, and a prior year is generally for extensions, balances due, installment payments, amended returns, and most other options. Selecting the correct year and type will ensure that these payments show up properly on your transcript.
Once you click the Continue button, you’ll be prompted to confirm the type of form and the period.
IRS Direct Pay Estimated Tax Payment and year confirmation.
At that point the system will ask you to enter a bunch of info to confirm your identity. The basic idea is to provide them name and address data from a prior-year tax return so that… well, so they know it’s really you. Since IRS Direct Pay works without a login, you will need to verify your identity each time you revisit it. Make sure you enter your name and address exactly as they appear on the tax return you are using for verification. If your name or address have changed, try selecting an earlier year for verification and enter the information from that year. This information does not need to be for the same tax year on which you are making your payment. It can be from as far back as 5 to 6 years ago depending on the time of year.
IRS “Direct Pay” Step 2 of 5, part one.IRS “Direct Pay” Step 2 of 5, part two.
Once you enter all this information and hit the “Continue” button, it will take you to a screen to enter the payment information — amount, bank account, and email address for confirmation. If you are having issues with the system accepting your information, double-check that you’re entering your name, SSN, date of birth and address exactly as it was on the tax return for the year you selected. The IRS has a Direct Pay troubleshooting page if you have more questions.
IRS “Direct Pay” Step 3 of 5, part one.IRS “Direct Pay” Step 3 of 5, part two.
Next, you’ll need to agree to the disclosure pop-up.
IRS “Direct Pay” disclosure pop-up.
In the final step, you will need to review all the information you have entered, provide an electronic signature including social security number or ITIN, and check the box to authorize the debit. Click Submit and you are done!
Please make sure to note how much you paid to each agency and on which dates — and let your tax preparer know this information as well. Securely uploading copies of the final confirmation screen to your tax preparer or bookkeeper is a great practice, so they can easily store the info in your file.
And if you use QuickBooks or another bookkeeping program, please make sure to enter the quarter, year, and “estimated tax” so that you or your bookkeeper or accountant or tax preparer can make sure it’s applied to the correct year, and for the right type of tax.
Many self-employed folks get surprised at tax-time with huge balances due, penalties and interest. Don’t let yourself fall into that trap — make regular payments online and taxes will be a breeze next year.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
