The Relationship Between IRS Tax Obligations and Cash Flow

It’s that time of year again, when businesses start preparing their quarterly 941 forms and figuring out their IRS tax obligations. While taxes may not be everyone’s favorite subject to discuss at the start of a new year, it is very important to understand the relationship between quarterly IRS tax obligations and the impact they have on cash flow.

Form 941 Tax Obligations

Form 941 allows businesses to figure out what they owe the IRS per quarter based on company size and earnings. The form is fairly straightforward and asks employers to list the number of people they employ, what they earn, and any taxes owed. After calculations, if your business has overpaid on taxes, that amount can be applied to the following quarter. Form 941 includes a tax schedule so businesses do not wind up placing a strain on finances by paying their IRS tax obligations in one large sum. The quarterly schedule for 941 taxes is as follows:

  • Q1: January-March

  • Q2: April-June

  • Q3: July-September

  • Q4: October-December

IRS Tax Obligations and Finances

If a business cannot pay their quarterly tax obligations on time, they can file for an extension. If taxes are left unpaid, the IRS does not hesitate to take action. The first step is that a notice of payment is sent to the business. If the notice is ignored, all outstanding tax obligations are moved to Collections. Unlike notices, Collections are handled by actual Revenue Officers who will reach out to the business to make an arrangement for payment. If that is ignored, the IRS will place a lien on the business. In that time, the business has the opportunity to pay the taxes owed or make an appeal. If the tax lien is ignored, the Revenue Officer will perform a forced collection in the form of garnished revenue or forced divestiture. Tax liens can place heavy pressure on a company’s cash flow. Most lenders avoid working with businesses that have tax liens because it demonstrates a lack of fiscal responsibility.

Staying Ahead of IRS Tax Obligations

To stay ahead of quarterly tax obligations, your business needs a healthy cash flow and working capital to make the necessary payments. For many businesses, this can be a challenge because a lot of revenue is tied up in unpaid receivables on staggered schedules ranging from 30 to 90 days. At Single Point Capital, we free up that locked capital by converting unpaid receivables into cash within 24 hours. Eliminate the lag in revenue, booth cash flow, and get ahead of your quarterly IRS tax obligations with factoring services from Single Point Capital. Contact our offices today to get started.