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Hi Taylor
- After another year of scrambling to pay taxes and wondering if I
could have paid less, I've started looking at estimated taxes. Do
you know, generally speaking, if this is a beneficial option for people
who are self-employed? - Kelly
Hi Kelly - Depending on your situation, paying estimated taxes
leading up to the filing year can be really helpful. The only real
downside is that some people think paying in advance offers some kind
of loophole, which isn't the way it works. If tax season gets you
down, here are three ways estimated tax payments could lower your
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1. Pay
in smaller allotments. We all like paying less whenever possible,
and while you won't reduce your overall tax bill, breaking $20,000
into four payments of $5,000 can feel a lot more manageable. Most
people who need to pay quarterly work for themselves and self-employment
often has busy and slow seasons. If you break what you owe into
installments, you get to choose when and how much you pay. This
lets you get a little more predictive and, as long as you calculate
responsibly, make larger payments when you have more cash flow
available.
2. Stay organized. I remember my first few years of paying
taxes as an adult and trying to go through a year's worth of business
earnings by memory. A lot of stuff happens each year, and it's
no small task to keep track of all of it. The workload shrinks
a little when you organize once every three months instead of
once annually. If your receipt management isn't the best, you'll
stand a better chance of finding information that's two months
old as opposed to 10 months old. The actual filing process doesn't
get easier from an IRS standpoint, but your personal filing process
should be a little less daunting when you break it into three-month
sections.
3. Work taxes into your budget. Hopefully you already
have a business budget, so adding a section for quarterly tax
payments shouldn't be too much of a stretch. It might make your
earnings look smaller on paper, but you can feel confident knowing
you won't have to start the year indebted to the government. You
might even get a bit of a return if you overpaid or had unexpected
expenses. It's pretty easy to add this to your budget - just take
last year's return, divide by four and plug that amount in for
April, July, October and January (or whichever months make the
most sense for your situation).
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Paying estimated
taxes doesn't change what you owe, it just changes your personal
management. If you feel like staggered payments will help you stay
organized, I think it's absolutely worth the effort. Hope it works
for you, Kelly!
© Taylor Kovar
January 19, 2019
More "Go Far With Kovar"
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| Disclaimer:
Information presented is for educational purposes only and is not
an offer or solicitation for the sale or purchase of any specific
securities, investments, or investment strategies. Investments involve
risk and, unless otherwise stated, are not guaranteed. Be sure to
first consult with a qualified financial adviser and/or tax professional
before implementing any strategy discussed herein. To submit a question
to be answered in this column, please send it via email to Question@GoFarWithKovar.com,
or via USPS to Taylor Kovar, 415 S 1st St, Suite 300, Lufkin, TX 75901.
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