Should Your Business Become Cash-Free?

A cashless business is one that processes all cash transactions electronically. There is no paper or coin money taken or handled. While no one society has become 100 percent cashless yet, most organizations are moving in that direction.

A business can become cash-free by providing multiple electronic alternatives to payment.  Credit cards are the most common electronic payment implementation. This option most likely includes MasterCard, Visa, Discover, and American Express.  Some businesses also have a PayPal account and offer that method for payments. Vemno, owned by PayPal, is an efficient mobile alternative, but it is mostly used for consumer-to-consumer transactions. And there is also cryptocurrency. 

Cashless businesses are more efficient, help to reduce crime, and have a better audit trail of transactions. Going cash-free also saves money and time spent counting the money, storing the money, safeguarding the money, protecting employees at risk of becoming theft victims, and physically going to the bank.

On the negative side, credit card companies charge fees to merchants, although these can now be passed to the customer in most states. Electronic transactions also require a higher level of technology, and privacy is reduced. And while security is an issue, all merchants that take credit cards must comply with PCI (Payment Card Industry) security standards and sign a document each year stating so. 

If your clientele does not keep their money in a bank or if they are not able (or have chosen not) to have a credit card, you may need to rethink going cashless. About 20 percent of U.S. households are challenged when it comes to having access to checking and savings accounts. This had led to several state and local laws being passed in the U.S. prohibiting a business from going cashless. Nothing has been passed at the national level as of this writing, however the Payment Choice Act was introduced in both chambers in mid-2020. 

The pandemic has accelerated the move to cashless with the desire for contactless transactions. Several countries are leading the way to becoming cash-free as an entire country, including Sweden, Finland, Norway, China, and South Korea. Sweden’s government has been the most aggressive, claiming they will become a 100 percent cashless society by 2023.   

Is going cashless right for you? Meeting your clients’ needs is a prime consideration. At the very least, you can move to increase the percentage of electronic transactions and decrease the percentage of cash transactions when feasible.  This measure will save time and money in and of itself. 

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How to Make Estimated Tax Payments

If you are paid a salary and receive a W-2 from your employer, part of your paycheck goes to Uncle Sam as federal withholding. These are payments toward your taxes. If you earn additional income beyond your salaried income, if you are under-withheld, or if you have your own business, you may need to make estimated tax payments through the tax year.  These estimated tax payments can be made on a quarterly basis.

The general rule is that as you earn income, you should also be paying a portion in taxes. If you don’t pay in enough, you may be subject to penalties.  To avoid penalties, the amount you pay as a minimum should be the lesser of 100% (or 110% depending on your income level) of your prior year tax or 90% of your current year tax during the year.

Whether the payments are made via withholdings or estimated tax payments, the IRS expects those payments to be made evenly and consistently throughout the year. If you don’t make any payments at all throughout the year and then pay a large amount late in December, you might get an estimated tax penalty because you didn’t remit payments as you earned the income.

Exceptions are allowed if your earnings substantially fluctuate throughout the year, quarter-by-quarter. You can complete Form 2210 to help minimize any penalty if you have fluctuating income and tax payments. 

Generally, estimated tax payments become applicable when you have either Schedule C or flow-through business income or significant investment income (interest, dividends, and capital gains), because there is usually no withholding on that type of income.

To make a payment or get directions on how to make a payment, go to Payments can be made by check (include estimated tax vouchers provided by IRS when you send them – 1040-ES forms) or online using a credit card or bank draft.

The due dates for remitting these payments are generally on the 15th of April, June, September, and January, unless one of those days is on a holiday or weekend (in which case payment would be due on the next business day).

For 2021 estimated tax payments, these dates are as follows:

  • April 15th, 2021 (1st quarter payment)
  • June 15th, 2021 (2nd quarter payment)
  • September 15th, 2021 (3rd quarter payment)
  • January 18th, 2022 (4th quarter payment)

If you have big payments due or big refunds due in April each year, then you are either paying too little or too much. Doing a good job at estimating your taxes will smooth out your payments throughout the year. If you’d like to get a projection for Tax Year 2021, feel free to reach out to us any time.

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