Uncle Sam expects a quarterly tax payment from the self employed. Since you don’t get a paycheck with regular tax withholding, the burden’s on you.
Lighten the burden. Make this the last quarterly tax payment you pay.
Seriously. Don’t make any quarterly payments for this coming year.
Think I’m advocating tax resistance? No way.
The tax collectors have more weapons than you want to encounter. It’s like the advice from the era of newspapers: don’t pick a fight with someone who buys ink by the barrel;
Don’t spit in the face of the tax man.
Give up making them quarterly, I say.
Pay taxes monthly, just like every other recurring bill in your life.
Why quarterly tax payments invite trouble
Folks who get a paycheck have their income tax liability, or at least some estimate of that liability, deducted from each paycheck. No fuss, and, well, only some bother.
Their take home pay has already paid the taxes. The paycheck is what is available to pay the bills.
Not so the self employed.
We are expected to make quarterly estimated tax payments in January, April, July, and October.
I’m sure the quarterly arrangement was seen as a convenience when instituted.
But it’s not necessarily convenient. You have to set aside money regularly so you have a fistful come quarter day.
If you free lance or run a small business, budgeting may be the hardest think you do. Who knows, in this economy, how much you’ll make this quarter, or how you’re going to pay the bills?
Quarterly payments invite us to fudge.
Get caught not having prepaid enough and you get hit with penalties.
Get really behind, and it’s tax liens and levies.
Pay this year’s taxes monthly
My charge? Add Uncle Sam to your list of creditors that you pay monthly.
Most creditors expect monthly payment: the rent, the car payment, the credit card. Add your estimated taxes to that list.
Income taxes are a cost of doing business. No reason not to pay them as you go, just like the folks on salary do.
- You avoid the need to set up a separate savings account in which to accumulate the taxes to be paid quarterly.
- You resist the temptation to use those savings for some intervening crisis.
- You escape the urge to make no provision “just this month”.
Making regular and smaller payments makes it easier to get the total bill paid in a manner that avoids penalties for not paying regularly.
Send your monthly income tax prepayment to the same place the quarterlies were headed. Write on your check your Social Security number and “estimated [YEAR] tax liability”.
Take care of taxes monthly and you don’t find yourself in a tax hole come next April.
Here’s the IRS on making estimated tax payments.
More on taxes
Dig out of payroll tax trouble
Find the mortgage interest deduction in Chapter 13
Image courtesy of Wikimedia.
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