Estimated Tax Payments: How to Avoid IRS Penalties and Plan Ahead
TL;DR Underpayment penalties currently run roughly 8% annualized — material money for any owner with $50K+ of unpaid quarterly tax. The safe harbor rule: pay 100% of last year’s tax (110% if AGI over $150K) and you owe no penalty regardless of how much you owe in April. California requires quarterly payments at 30%/40%/0%/30% of […]
LLC vs. S-Corp vs. C-Corp: Which Entity Is Right for Your Bay Area Business
TL;DR LLCs (default partnership taxation) are simplest but subject all profit to self-employment tax — usually a mistake once net income exceeds $80K. S-corps split income into W-2 wages (payroll tax) and distributions (no payroll tax), saving $5K-$20K annually for typical Bay Area owners. C-corps are taxed at the entity level (21% federal) and again […]
When to Set Up an S-Corporation as a Sole Proprietor — and How It Boosts Your Bottom Line
TL;DR For most Bay Area sole proprietors, the S-corp election makes sense once net business income exceeds $80K-$100K. The S-corp splits income into W-2 wages (subject to 15.3% payroll tax) and distributions (no payroll tax) — saving $5K-$20K annually for typical owners. The election costs roughly $1.5K-$3K annually in additional administrative work (payroll, separate return) […]
How to Handle IRS Notices and Audits: A Bay Area CPA’s Step-by-Step Guide
TL;DR Most IRS notices are routine matching letters (CP2000, CP2100, CP59) — alarming but not catastrophic if responded to correctly. Audits come in three flavors: correspondence (mail-only, narrowest), office, and field — escalating in scope and seriousness. Never ignore an IRS notice. The penalties compound and the appeals window closes. Engage a CPA or tax […]