Paying personal income taxes from your S-Corp? Use the right path.
If you are using money from your S-Corp to pay personal income taxes, don’t pay the IRS directly from the business account as a business expense. Avoid the dreaded commingle!
The cleaner bookkeeping path is:
Business account → Shareholder distribution → Personal account → IRS
You can keep the money in the business savings account until you are ready to make the payment. But before the tax payment is made, transfer the money to your personal account first. That transfer is typically recorded as a shareholder distribution, not a business expense.
Then pay the IRS from your personal account.
One important bookkeeping tip: let your bookkeeper know when you make IRS payments from your personal account. That helps us properly categorize the transfer from the business account and keep track of your tax payments, so you and your tax advisor have clearer information for planning.
Commingling costs time and creates transactions that require an explanation.
Clean books now make tax time much easier later.
