Business FinancesQuestion 1232 of 1632
A contractor pays estimated federal taxes of $6,000 per quarter. If he skips a quarter to fund payroll and pays it late, the likely consequence is:
a.Loss of his contractor license automatically
b.A reduced franchise tax
c.An IRS underpayment penalty and interest
d.A refund of the sales tax
Explanation
Missing or underpaying required estimated tax installments triggers IRS (and state) underpayment penalties plus interest. Using tax money for payroll creates a debt to the government that grows with penalties.
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Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)