Can I Pay My Personal Taxes From My Business Account?
Posted On: Tuesday, April 5, 2022
Once tax returns have been prepared and the amount owed is determined, the next step is to figure out the best payment option.
One of the more common questions small business owners have is how they pay their personal taxes. They often want to pay out of their business account. Is this possible?
Using Business Accounts
For the most part, personal taxes should only be paid from your personal bank accounts. This is to ensure issues don’t arise when trying to distinguish personal expenses from business expenses. Commingling business and personal expenses can make it significantly more challenging to provide a clear road map of transactions in the event of an audit.
The best option is to first transfer funds from the business account to the personal account, and then use those funds to pay personal income taxes or any other personal expenses.
On the other hand, if a business owner wishes to pay their personal income taxes from their business bank account as a more convenient option, it can be done.
Personal income taxes are not a deductible expense of the business. As such, the payment of personal income taxes from a business account must be recorded as a distribution to the owner rather than a tax expense.
This differentiation treats the withdrawal of funds from the business account used to pay personal income taxes as though it were a transfer directly to the owner, without creating a deductible expense for the business.
Know The Payment Schedule
If your sole proprietorship, LLC, partnership, or S-Corp is expected to have a profit, it might be time to consider paying quarterly estimates of personal income taxes.
Paying quarterly estimates can help reduce or avoid interest assessed on late tax payments.
Final Thoughts
Talk to an accounting specialist at Rakatansky, Rakatansky, & Associates regarding the best method to pay your personal taxes and how to make quarterly estimated tax payments to avoid incurring any unnecessary fees. We are an experienced multifaceted CPA and financial advisory firm providing tax planning, tax preparation, accounting, and legal services to individuals, businesses, trusts, and estates throughout New England. We also offer financial planning and wealth management services to help our clients achieve their financial goals. Call us or use our contact form to get in touch.