The great Yogi Berra has a famous saying: “It’s like déjà vu all over again.”

On April 15th (Tuesday April 18th in 2017) the IRS is going to want the money that taxpayers owe them for 2016 taxes. In addition, they would like taxpayers to send their first installment of their 2017 taxes. This double whammy can leave taxpayers feeling like they are a weather man in a small Pennsylvania town in February.

Most employed taxpayers will have federal withholding, Social Security, and Medicare taxes withheld from their paychecks on a weekly, bi-weekly, or monthly basis. If this is all the income that the taxpayer has, it should be enough to stave off the tax man and not require the taxpayer to make an additional payment when their 2017 tax returns are filed in 2018. For taxpayers that have a small business, a side business, stocks sales, etc. they are on the hook to make these payments to the IRS.

So, what if a business can’t make their estimated tax payments, what are the options?

The underpayment penalty can be difficult to calculate, however, for 2017 it will be about 3% of the balance due.

So if you owe $22,000 in estimated tax payments for the 2017 tax year, and you do not make a payment until next April when you file your tax return, you could expect to pay about $575 in penalties. So not sending the IRS $22,000 will cost you $575.00.

But what could that extra $22,000 provide your business?

For one you could put that money in a short term CD or interest bearing savings account with your bank, and earn a few dollars of interest. If you are able to earn more than or close to the penalty the IRS charges, that makes the cost virtually nothing.

In addition, the $22,000 stays on your balance sheet as a cash asset.

This makes your business more attractive to lenders, investors, etc. You could use it to pay for current-period expenses during slower times of the year. If your business is seasonal and you know it’s going to be tough to get cash in the door, you may need to have extra cash on hand to pay for reoccurring expenses.

Another option would be to use the money as collateral for additional financing for your business.

Some loan covenants require you to deposit a certain amount with the new lender and these payments could satisfy those requirements.

For any small business, cash is king.

The choice to make or not make estimated tax payments involve many factors including cash reserves, lending requirements, and the penalty from the IRS for not making the payments. Having enough cash on hand to pay vendors, employees, and the owners is a constant concern for many business owners, especially those that are just starting out. Mapping out how cash will flow into and out of the business should involve a thorough look at all expense items including federal tax payments. Business owners approach this from the top down. Building expenses around a sales team can leave you in the red rather quickly. A better way for any business to operate is to start with the expenses of the business including current and not current, like estimated tax payments, and determine if the sales will add up to a profitable forecast.