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Recap: 2025 Estimated Tax Payments

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The deadline for your 2025 Q4 Estimated Tax Payment is January 15, 2026. Missing this date doesn’t just trigger interest—it signals a lack of operational oversight that can lead to costly underpayment penalties.

The Mechanics of Safe Harbor: PY vs. CY

To avoid the IRS underpayment penalty, you must satisfy the “Safe Harbor” requirements. This means paying the lesser of two specific amounts throughout the year.

1. The Current Year (CY) Rule: The 90% Threshold

You must pay at least 90% of the tax liability shown on your 2025 tax return.

  • The Risk: This requires a precise “surgical” estimate of your total 2025 income, including late-year capital gains or business spikes. If you underestimate your total liability, you lose this protection.

2. The Prior Year (PY) Rule: The 100%/110% Floor

This is often the preferred strategy for the Strategic Principal because it provides a fixed, known target based on your 2024 return.

  • Standard Safe Harbor: Pay 100% of the total tax shown on your 2024 return.
  • The “High-Income” Adjustment: If your 2024 Adjusted Gross Income (AGI) was over $150,000 ($75,000 if Married Filing Separately), your Safe Harbor jumps to 110% of your 2024 tax liability.

Strategic Comparison: Which Method to Use?

ScenarioRecommended MethodWhy?
Income is RisingPrior Year (110%)Protects you from penalties on the “excess” profit without tying up extra cash in overpayments.
Income is FallingCurrent Year (90%)Prevents you from overpaying the IRS based on last year’s high margins, keeping capital inside your business.
Unpredictable SpikesPrior Year (110%)Provides an absolute shield against penalties, regardless of how high your 2025 income climbs.

Specialized Exceptions: Farmers and Fishermen

If at least two-thirds of your gross income for 2024 or 2025 is from farming or fishing, you only have one estimated tax payment due date: January 15, 2026. Your Safe Harbor requirement is reduced to 66.67% of your current year tax or 100% of your prior year tax.

The Next Move: Architect Your Final Payment

Estimated taxes are not just a bill; they are a strategic maneuver. Before you hit the January 15 deadline, let’s ensure your payments are optimized for your 2026 growth. Meet your new CPA today—we’re here to help you along the way.

  • Safe Harbor Audit: We can perform a final review of your 2024 vs. 2025 numbers to determine if you are over-allocating capital to the IRS.
  • Underpayment Mitigation: If you missed earlier payments, we can architect a “catch-up” strategy using increased year-end withholding to surgically excise potential penalties.
  • 2026 Cash Flow Planning: Let’s set your quarterly targets for next year now, ensuring your enterprise value isn’t drained by avoidable interest.
Schedule Consultation

About the Author

Michael R. Arrache, CPA & Realtor®

As a Certified Public Accountant (CPA), Enrolled Agent (EA), and licensed Realtor®, Michael is a tax and real estate strategist who specializes in the intersection of business ownership and property investment. His firm provides high-level tax architecture, CFO consulting, and Real Estate strategies for real estate and business owners looking to increase profits and grow their wealth.

With over 15 years of experience, Michael’s mission is to move clients from passive earners to strategic principals in their own financial lives. These publications serve as a guide through the complexities of business and real estate, offering the tailored solutions and strategic oversight needed to secure a multi-generational legacy.

CODE RED: The Final Tax Deadline is HERE. File or Face Penalties.

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You filed your extension—good. Now, it’s October 11th, and the true deadline is staring you down. Tax season is over for everyone else, but for you, the clock is running out on the Failure to File Penalty, which is 10 times higher than the penalty for late payment.

This is a Code Red. You need an urgent strategy to file your return immediately and prevent penalties from accruing.

The Urgent Pain Point: What Happens on October 15th?

When you filed Form 4868, you successfully avoided the Failure to File penalty back in April. However, failing to file by the extended October 15th deadline activates the most costly penalties retroactive to the original April deadline.

PenaltyRateCostly Trigger
Failure to File (Worst Penalty)5% of the unpaid tax for each month or part of a month the return is late.Missing the October 15th deadline.
Failure to Pay (Lesser Penalty)0.5% of the unpaid tax for each month or part of a month it remains unpaid.This continues to accrue even with an extension, but is far smaller than the Failure to File penalty.

The Stakes: If you owe the IRS, missing the October deadline triggers the massive 5% per month Failure to File penalty, compounded with the Failure to Pay penalty and daily interest charges. Your total penalty could climb to 25% of your unpaid tax very quickly.

Your Immediate Action Plan to Stop Penalties

Your goal is simple: File. Now. File the return, even if you can’t pay the balance in full. Filing stops the 5% penalty immediately.

1. Prioritize Documentation & Organization

Do not waste time trying to perfectly calculate every deduction. Focus on accurately reporting all income (W-2s, 1099s, K-1s) and high-priority deductions (like mortgage interest and estimated payments).

  • Action: Find and scan (or take clear photos of) your income documents. File your tax return using this information as soon as possible.

2. File Electronically (The Only Option)

Paper returns take weeks or months to process. E-filing is the fastest way to get your return to the IRS and secure that October 15th timestamp, which is what matters most.

  • Action: E-file your return now. The IRS Direct File service is available through October 15th for qualified taxpayers, as are major software platforms.

3. Pay What You Can to Minimize Interest

The Failure to Pay penalty is based on your unpaid balance. Reduce the base amount of the penalty and interest by paying any amount you can with the return.

  • Action: If you owe $5,000 but can pay $1,000 today, pay it. That interest and penalty stops accruing on that $1,000 immediately.

What to Do If You Owe and Can’t Pay

Successfully filing by October 15th gives you leverage when dealing with the IRS. Don’t let a payment issue stop you from filing.

Option A: Online Payment Agreement

The IRS offers several payment options, including short-term and long-term Installment Agreements. You can often apply online if you owe less than $50,000.

  • Benefit: Setting up a payment plan reduces the Failure to Pay penalty rate from 0.5% to 0.25% per month.

Option B: Penalty Relief

Once you have filed your return and established a payment plan, you can request penalty relief.

  • First-Time Abatement (FTA): If you have a clean compliance record (no prior penalties in the past three years), you may qualify to have the initial penalties waived.
  • Reasonable Cause: If the delay was due to circumstances beyond your control (e.g., serious illness, death in the family, or a natural disaster), you can formally request a penalty waiver by providing documentation to the IRS.

Do not wait until October 16th. Your priority is to file the tax return before midnight on October 15th to lock in your compliance and avoid the harshest penalties the IRS charges.

Take Action: Don’t Face the IRS Alone

If the complexity of your return is what is slowing you down—especially with rental properties, K-1s, or business income—the risk of not filing far outweighs the cost of professional help. Get your documents to an expert now to ensure the October 15th deadline is met. Reach out to us today to see how we can help you along the way.

About the Author

Michael R. Arrache, CPA, EA, DRE

As a Certified Public Accountant (CPA), Enrolled Agent (EA), and licensed Realtor, I am a tax expert who works closely with small business owners and real estate investors. My firm, Arrache CPA, Inc. dba Mr. Smart Tax, provides a range of specialized financial and real estate services, including tax planning, business transactions, and real estate advisory. With over 15 years of experience, my mission is to help clients achieve their financial and business goals by providing strategic advice and tailored solutions. I write these articles to serve as a starting point to guide you through the business or real estate process, and I am committed to providing the strategic guidance you need to help preserve and grow your wealth.

Contact us at info@mrarrachecpa.com.

Solving Restaurant Pain Points: How New Texas Laws Provide Relief

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The recent legal changes in Texas offer solutions to several long-standing pain points for restaurants, though some new challenges may arise. The new laws address issues like inconsistent regulations, high costs, and a competitive labor market.

Pain Point: Confusing and Costly Local Regulations

For years, restaurants have had to navigate a complex patchwork of permits and fees from over 200 different jurisdictions in Texas. This often led to duplicate permits and high costs, creating significant burdens, especially for small businesses.

  • How the new law helps: Senate Bill 1008 directly addresses this by capping local health department fees at state-level rates and eliminating duplicative requirements. A state food manager certificate is now valid statewide, which removes the need for extra local paperwork and fees. This change is expected to save restaurants money and reduce time spent on bureaucracy. It creates a more consistent and predictable regulatory environment.

Pain Point: High Business Costs

High operating expenses, including taxes on business property and inventory, have been a constant struggle for many restaurants. These taxes often penalize growth and add a time-consuming administrative burden.

  • How the new law helps: Proposition 9 aims to provide significant relief by raising the business personal property tax exemption from $2,500 to a massive $125,000. If voters approve it in November 2025, this change could free thousands of small businesses from an annual tax and reporting requirement. It would allow restaurants to invest in future growth, increase wages, and support local communities.

Pain Point: Sourcing and Supply Chain Hurdles

Sourcing ingredients and unique products has been a challenge, with strict regulations often limiting partnerships with smaller, local producers. The previous laws for cottage food producers were restrictive, capping annual sales and limiting the types of foods they could sell.

  • How the new law helps: Senate Bill 541 broadens the scope for cottage food producers. It raises their annual sales cap to $150,000 and allows them to sell to third-party businesses like restaurants. This creates new opportunities for restaurants to partner with local artisans and feature unique, locally-made items. The bill also now allows the sale of refrigerated baked goods and enables product sampling.

Pain Point: Anticipating Future Consumer Demands

Consumers are becoming more aware of what’s in their food and are demanding greater transparency. This creates a new challenge for restaurants to adapt to changing expectations and potential future regulations.

  • How the new law could worsen this: While Senate Bill 25, which pertains to food additives and labeling, does not take effect until 2027, it signals a trend that restaurants may need to address in the future. While the law’s warning label requirement is aimed at manufacturers, the growing public awareness of food additives could pressure restaurants to audit their recipes and menus to get ahead of the curve.

Pain Point: Workforce and Operational Flexibility

The restaurant industry continues to face staffing shortages and rising labor costs. Restaurants also have to deal with various local sound ordinances and delivery restrictions that can limit operational flexibility.

  • How the new law helps: The Texas Restaurant Association secured several reforms that support the workforce, including improved access to childcare. The new laws also grant operational flexibility by ensuring restaurants don’t have to pay for sound permits to play background music or accept deliveries at night.

Timeline of New Texas Laws and Initiatives Affecting Restaurants

Here is a timeline of the new laws, propositions, and other initiatives and when they take effect, according to the provided article.

InitiativeDescriptionEffective Date / Key Date
Senate Bill 1008Caps health department permit fees and makes state food manager certificates valid statewide.September 1, 2025.
Senate Bill 541The “Texas Food Freedom Act,” which raises the annual sales cap for cottage food producers and allows new sales methods.September 1, 2025.
Proposition 9A ballot measure to increase the business personal property tax exemption to $125,000.Voter approval in November 2025.
Proposition 9 ImpactThe increased tax exemption from Proposition 9 takes effect for tax years beginning on or after this date.January 1, 2026.
Federal Tax CreditsUpcoming federal tax credits for paid family leave and childcare.2026.
Senate Bill 25A law concerning additives and food labeling.2027.

If you want help starting, operating, expanding, or selling your restaurant or real estate investments, we are here to help. Contact us at info@mrarrachecpa.com.

About the Author: Michael R. Arrache, CPA

As a Certified Public Accountant (CPA), Enrolled Agent (EA), and licensed Realtor, I am a tax expert who works closely with small business owners and real estate investors. My firm, Arrache CPA, Inc. dba Mr. Smart Tax, provides a range of specialized financial and real estate services, including tax planning, business transactions, and real estate advisory. With over 15 years of experience, my mission is to help clients achieve their financial and business goals by providing strategic advice and tailored solutions. I write these articles to serve as a starting point to guide you through the business or real estate process, and I am committed to providing the strategic guidance you need to help preserve and grow your wealth.

Filing Deadline for Individual Tax Return April 18, 2023*

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IMPORTANT REMINDER Tax Deadline is April 18, 2023. Normally the tax deadline is April 15th but this year Emancipation in Washington DC is April 16th (Sunday) so it will be celbrated Monday April 17th

Imporant tax deadline can not fall on weekend or holiday so taxes for Individuals Taxes or Extensions are due April 18, 2023.

*certain people impacted by natural disaster have had their tax deadlines extended. Please contact us immediately to see if you qualify for this additional natural disaster extension.

Per the Governor of California Gavin Newsom’s Office

TAX EXTENSION

To help alleviate some of the stress many have endured during this trying period, the FTB has extended the filing and payment deadlines for individuals and businesses in California until May 15, 2023.

This relief applies to deadlines falling on or after January 8, 2023, and before May 15, 2023, including the 2022 individual income tax returns due on April 18 and the quarterly estimated tax payments, typically due on January 17, 2023 and April 18, 2023.

The IRS announced tax relief for Californians affected by these winter storms. Taxpayers affected by these storms qualify for an extension to May 15, 2023 to file individual and business tax returns and make certain tax payments. This includes:

  • Individuals whose tax returns and payments are due on April 18, 2023.
  • Quarterly estimated tax payments due January 17, 2023 and April 18, 2023.
  • Business entities whose tax returns and payments are due on March 15, 2023

In addition, FTB will suspend the mailing of collection notices to affected taxpayers for the next 30 days, beginning January 13, 2023.

Here is a link to find more information on  FTB Publication 1034, 2022 Disaster Loss: How to Claim a State Tax Deduction

https://www.gov.ca.gov/2023/01/13/tax-relief-for-californians-impacted-by-storms

7 Tax Strategies to take advantage of before year end and in 2018

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Tax Cuts and Jobs Act

was signed December 22, 2017 by president Donald Trump.

Coming late in the tax year, the passing of the tax law changes leaves little time to make smart tax moves before year end.

The following is a list of 7 popular tax planning moves you can make before year end and in 2018 to save money and reduce taxes. Please note that this is a general list of tax planning strategies and you should speak with our tax experts to see if you qualify for any of the following tax planning strategies.

  • Accelerate your charitable giving into 2017 if you will take the standard deduction in 2018
  • Pay off home equity line of credit before year end if you don’t plan to borrow against the HELOC in 2018
  • Pay 2018 home real estate tax April installment before year end. Consider AMT and NIIT.
    Pay 2017 estimated state taxes before year end. Consider AMT and NIIT.
  • Accelerate paying your 2017 medical expenses into 2017 if you will take the standard deduction in 2018
    Pay 2017 HSA contribution before April 17, 2018 and have it applied to 2017 tax year.
  • Pay 2017 Traditional IRA or SEP IRA contribution before April 17, 2018 and have it applied to 2017 tax year. Note that the due date for establishing and funding a SEP IRA can be extended with an applicable tax extension filing.

If you have any questions please contact us and speak with one of our tax experts. 800-425-0570 or email contact@MrSmartTax.com

Written by Michael R. Arrache CPA, EA

December 23, 2017

www.MrSmartTax.com

Iggy Azalea Tax Troubles & Tips For Paying Off The IRS

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Iggy Azalea Tax Trouble IRSPop singer Iggy Azalea has skirted confirming rumors of IRS troubles to the tune of $400,000. Iggy recently tweeted @IGGYAZALEA “The IRS gave the option to pay them monthly or lump sum. i picked monthly, who wouldnt?”

Great question Iggy. Read below for facts regarding late payments, installment agreements and tips for taxpayers who owe the IRS money.

Failure-to-pay Penalty – If you do not pay your taxes by the tax deadline, you normally will face a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes. That penalty applies for each month or part of a month after the due date and starts accruing the day after the tax-filing due date. If Iggy owes the Feds $400,000, that means she is accruing $2,000/month of failure-to-pay penalty until her installment agreement is accepted, then reduced there-after.

Installment Agreements – An installment agreement is an option for those who cannot pay their entire tax bills by the due date. Penalties are reduced, although interest continues to accrue on the outstanding balance. In order to qualify for the new expanded streamlined installment agreement, a taxpayer must agree to monthly direct debit payments. Taxpayers seeking installment agreements exceeding $50,000 will still need to supply the IRS with a Collection Information Statement (Form 433-A or Form 433-F). Taxpayers may also pay down their balance due to $50,000 or less to take advantage of this payment option. The maximum term for streamlined installment agreements has also been raised to 72 months from the current 60-month maximum.Ten Tips for

General Tips for Taxpayers Who Owe Money to the IRS –

  1. Tax bill payments If you get a bill this summer for late taxes, you are expected to promptly pay the tax owed including any penalties and interest. If you are unable to pay the amount due, it is often in your best interest to get a loan to pay the bill in full rather than to make installment payments to the IRS.
  2. Additional time to pay based on your circumstances, you may be granted a short additional time to pay your tax in full. A brief additional amount of time to pay can be requested through the Online Payment Agreement application at www.irs.gov or by calling 800-829-1040.
  3. Credit card payments You can pay your bill with a credit card. The interest rate on a credit card may be lower than the combination of interest and penalties imposed by the Internal Revenue Code. To pay by credit card contact one of the following processing companies: Link2Gov at 888-PAY-1040 (or www.pay1040.com), RBS WorldPay, Inc. at 888-9PAY-TAX (or www.payUSAtax.com), or Official Payments Corporation at 888-UPAY-TAX (or www.officialpayments.com/fed).
  4. Electronic Funds Transfer You can pay the balance by electronic funds transfer, check, money order, cashier’s check or cash. To pay using electronic funds transfer, use the Electronic Federal Tax Payment System by either calling 800-555-4477 or using the online access at www.eftps.gov.
  5. Installment Agreement You may request an installment agreement if you cannot pay the liability in full. This is an agreement between you and the IRS to pay the amount due in monthly installment payments. You must first file all required returns and be current with estimated tax payments.
  6. Online Payment AgreementIf you owe $25,000 or less in combined tax, penalties and interest, you can request an installment agreement using the Online Payment Agreement application at www.irs.gov.
  7. Form 9465You can complete and mail an IRS Form 9465, Installment Agreement Request, along with your bill in the envelope you received from the IRS. The IRS will inform you (usually within 30 days) whether your request is approved, denied, or if additional information is needed.
  8. Collection Information Statement You may still qualify for an installment agreement if you owe more than $25,000, but you are required to complete a Form 433F, Collection Information Statement, before the IRS will consider an installment agreement.
  9. User fees If an installment agreement is approved, a one-time user fee will be charged. The user fee for a new agreement is $105 or $52 for agreements where payments are deducted directly from your bank account. For eligible individuals with lower incomes, the fee can be reduced to $43.
  10. Check withholding Taxpayers who have a balance due may want to consider changing their W-4, Employee’s Withholding Allowance Certificate, with their employer. A withholding calculator at www.irs.gov can help taxpayers determine the amount that should be withheld.

More info about Iggy’s Tax Troubles

Call Mr. Smart Tax, Inc. if you need help with IRS tax debt relief.  (800) 425-0570

 

California’s “Jock” Tax Explained

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Better listen up Cam. California, like many other states, taxes a percentage of professional athletes’ income from “duty days” in the state. Duty days are days services are performed under contract during the pre-season, regular-season and post-season. Each state will get a pro-rata share of the professional athlete’s annual income allocated by duty days performed in the state divided by total duty days multiplied by annual compensation. Super Bowl L will be played in California where the top tax bracket is 13.3%.

Example: If Cam Newtown, the QB of the Carolina Panther’s, earns $13-million in 2015-2016 seasons and he has 200 total duty days, 10 of which are duty days in California, then he will have $650,000 of California taxable income.

If you have any tax questions please call Mr. Smart Tax, Inc. today! 949-877-3143 or toll-free 1-800-425-0570 or email us at Contact@MrSmartTax.com

LLC vs S Corporation – What’s the difference?

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scorp llc door

Most every business start-up has come across the question “LLC or S corporation?”.

While this is a very common question, the response is often different depending on who you are talking to.

It should be noted that an LLC might work for some while an S corporation could be better for others – there is no “one size fits all” approach to entity selection.

In short, here are a few pro’s and con’s for the LLC and S Corporation entity structure:

 

LLC –

  • PRO – Divide profit as members see fit
  • CON – Passthrough income subject to self-employment tax if member has personal liability for debts of LLC or actively participates in trade or business of LLC

S Corporation –

  • PRO – Passthrough income is not subject to self-employment tax. Only employee-shareholder “reasonable compensation” subject to payroll taxes.
  • CON – Only issue single type of stock and must distribute profit based on percentage of stocked owned

Of course there are many more pro’s and con’s for each entity selection – feel free to call us with any questions and will be happy to discuss more (800) 425-0570.

For more related information visit the following links:

http://tiny.cc/xjz22x   IRS: Partners’ Share Of LLC Income Is Subject to Self-Employment Tax

http://tiny.cc/smz22x  5 Common Objections to Forming a Corporation or an LLC