I want to share a warning with you about the taxes that are coming your way. I don’t want you to be shocked or unprepared.
U.S. small businesses have received an extension for the first quarter 2020 estimated tax payment. The first quarter estimated tax payment that was originally due April 15, 2020, is now due July 15, 2020. Additionally, the second quarter estimate originally due on June 15, 2020 is now due on July 15, 2020. Estimated taxes for the third quarter are still due September 15, 2020. As a result, three tax payments will be due within 60 days of each other.
Some business owners are treating the postponement of taxes as “free money.” It is not. Taxes are still due. The same amount still needs to be paid. The due date changes simply afford you time to focus on other business priorities, it does not alleviate your tax burden.
Treat your taxes like they are due on the original dates. Put the money aside and don’t use it for any other purpose.Then pay your estimates by the new due dates. Businesses owners who fail to prepare for The 60 Day Triple Tax Punch may experience devastating cash flow challenges as a result.
I have provided additional resources like this on Recession Response page. I know it will serve you.
I am wishing you tremendous success.
You’ve got this!
– Mike
Do we pay this out of our tax account in Bank two?
This is the TAX HOLD ACCOUNT (No Temptation- Bank 2) that holds this reserve, following the Profit First method.
Hi Mike,
For the past couple of years I have been, for the most part, using the principles of Profit First. Every quarter we shift the profits, taxes and savings into separate accounts. By doing this we are not in desperation mode when tax time comes or when faced with a pandemic; we have sufficient reserves in the savings to hopefully weather this storm. Thanks for the practical business advice for those of us that did not graduate from Wharton.
Paul – Congratulations on your implementation of Profit First. Well done. Wishing you continued success and profitability. I have no doubt you will weather the storm.
If they are 60 days apart, how come the first and second are both due on July 15th?
Nevermind, why does June and July have to start with J. I can see how this is confusing, how is it you can fill on July, then pay in June. Sounds like a mest up Back to the Future rerun.
Mike, if we’re following Profit First properly, do you find that those businesses will be adequately prepared for these 3 payments? Thanks! – Justin
Yes. If you follow Profit First and the 15% reserve, your good. Just DONT use the money for any other purpose. I am seeing business spend tax reserves on expenses “because they have time to make the money back”. That’s the mistake. It is all still do, just in one big lump.
That’s not to mention property tax – my biggest bill as a homeowner. Early (discount) payment is usually due August 30.
The 60 day triple tax warning is very helpful. Thank you. I knew Q1 and Q2 are delayed and I’ve been saving for them using a separate account (thank you Profit First). I think I would be really stressed if I didn’t adopt the separate accounts like you suggest in the booj. Thank you. But there is a substantive typo you should fix on the PDF. Q4 estimated taxes are not due October 15, 2020. They have always been due January 15, 2021.
THANK YOU for this warning! I’m a tax preparer and find myself terrified on behalf of small businesses. As I tell clients that they don’t have to make any of these payments until July 15, I also find myself fearful in the back of my mind – just because they don’t HAVE to, does that make it something they should do… Thanks for working to remind your little circle of business owners that this is a big whammy coming up.