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Estimated Tax Sole Proprietorship

How do I perform the bookkeeping for:

 

Putting aside estimated tax funds in a separate bank account. 

There is a business savings account soley for sequestering these funds.  Estimated funds are transferred from the business checking account and held in a business savings account and then transfered back to the checking account when the Tax Payment is due.

 

While the funds are in the savings account waiting for the Tax Payment time, how do I account for these as an Income Tax Liability? 

 

I understand that the Estimated Tax payment should be an equity draw rather than an expense.  And I have an equity account for Income Tax Payments.

 

Many thanks,

akpowell

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Re: Estimated Tax Sole Proprietorship


@akpowell wrote:

How do I perform the bookkeeping for:

 

Putting aside estimated tax funds in a separate bank account. 

There is a business savings account soley for sequestering these funds.  Estimated funds are transferred from the business checking account and held in a business savings account and then transfered back to the checking account when the Tax Payment is due.

 

that is fine

 

While the funds are in the savings account waiting for the Tax Payment time, how do I account for these as an Income Tax Liability? 

 

You don't, well except for your knowledge.  A sole proprietor business does not have a tax liability, the person does.  Doing it the way you are doing is fine.

 

I take the funds out of the business depositing them to a personal savings account during the quarter (equity draw).  I get a better interest rate on a personal account, and the funds are not in the business where I might be tempted to "borrow" them for current expenses.

 

I understand that the Estimated Tax payment should be an equity draw rather than an expense.  And I have an equity account for Income Tax Payments.

 

Many thanks,

akpowell