Otherwise, employees must report those expenses as income and deduct them on their personal tax returns subject to limitations. Companies in these zones save a lot of money in taxes, but these zones may not be a nice place to locate a corporate office. Cash Flow Management. Companies that do not project taxes will have a liquidity problem at some point. The government wants its money during the year in the form of estimated tax payments and will charge interest and penalties for inadequate tax payments.
Careful consideration needs to be made to determine the method for estimated tax payments.
Both corporations and individuals can base their tax payments on an estimate of current year s income or prior year s taxes, which are subject to certain restrictions. In general, the only entity other than individuals that must pay federal income taxes is the C corporation. Flow-through entities, such as S corporations, partnerships, and LLC s do not pay taxes, but their shareholders or partners must pay individual estimated taxes on the undistributed net income of these entities. This benefit is significant because other ordinary income such as wages can be offset with these losses. It also will benefit our schools.