Everyone wants to be their own boss, but few people really understand what comes with that. At the very least, know that you’re responsible for handling your taxes.
Paying taxes quarterly and in advance is the safest and easiest way to keep the Internal Revenue Service (IRS) satisfied and out of your hair. Learning how to properly handle these estimated payments is something that every business owner should know.
Here’s what you should know about paying estimated taxes.
Whip Out Your Data and Calculate Your Estimates Taxes
While these taxes are estimated, it always behooves you to move with the most accurate and well-researched information.
Making use of a quality tax calculator helps you to know upfront how much you’ll owe. This calculator will factor in your earnings, the current tax rate and your tax bracket to figure out how much you should be paying in estimated taxes.
Have a Bank Account for Storing Your Tax Money
It’s best to keep your money and the IRS’ money separate. You can do this seamlessly by setting up a bank account that you use strictly for your tax money.
Having separate accounts lets you clean up your accounting and avoids the temptation to dip into the money before cutting the check. You might even want to store this money in an account that bears interest so that you get a small return on your investment.
Know the Tax Deadlines and Pay in Advance
Learning and adhering to the estimated tax deadlines will keep you out of trouble more than anything else. You can set your calendar alerts to remind you when an estimated tax deadline approaches.
Failing to pay estimated taxes could leave you open to some extra fees once you actually file your taxes. Even though these payments are due quarterly, you can actually post estimated tax payments whenever you’d like.
Some business owners even opt to process these tax payments weekly just to make sure that they don’t forget.
Keep All of Your Payment Records
Paying estimated taxes is easy when you use a third-party online processor. When you make a payment you’ll get a receipt with a confirmation number.
Always keep these payments for your own records, so that you have proof if the IRS says that you didn’t pay or underpaid. Knowing in advance how much you’ve already paid will make filing your taxes so much easier as well.
Handle Your Tax Obligations Carefully and Upfront
So there you have it. These points alone will help you avoid half of the heartache that comes with your tax burden. Paying estimated taxes satisfies your tax responsibility and can even get you a refund.
Ideally, you should hire the help of a certified public accountant (CPA) that can help you out with your tax obligation. They’ll know what matters apply to your tax bracket and the type of business that you run.
Let’s be game-changers together! Follow these tips and check back when you need answers on business, finance and so much more.