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For this 3 part series we will be covering different facets of estimated tax. You’ll learn the basics, how to avoid underpayment of estimated taxes and some new strategies to replace the traditional monthly payments.
HOW TO AVOID UNDERPAYMENT OF ESTIMATED TAX PENALTIES
Every year, taxpayers and tax professionals alike engage in the familiar rhythms of gathering, reconciling, and reporting their income, deductions, payments, and credits. However, these rhythms are distinctly different for W-2 employees versus self-employed taxpayers and those with other income not subject to withholding like interest income, dividends, capital gains, or IRA distributions.
If you are a W-2 employee, your employer takes care of your tax compliance by withholding and remitting federal, state, local, Social Security, and Medicare taxes from your salary. Additional tax withholdings may come from pensions, unemployment compensation, gambling winnings, or other income. If you are self-employed or have other income not subject to withholding, you will need to prepay your taxes by making estimated tax payments.
The traditional schedule for estimated tax payments is quarterly (due April 15, June 15, September 15, and January 15 of the following year), but not every taxpayer will find it easy to comply with this preset schedule. Those with specific budget and cash flow needs will want to consult a Certified Tax Planner about your options to ensure you remain tax compliant. Next week we’ll cover a few tips to help you to strategically plan your estimated tax payments.
Estimating tax payments is just one of the many things that the self-employed have to deal with in the world of tax. There are so many other areas where businesses can legally cut back on the taxes they pay. Saving on taxes is the quickest way to increase your income! Join our DeTax University program for 16 classes that will guide you through saving taxes in areas like vehicles, short term rentals, retirement plans and so much more. Our goal is to save you over $10,000 in taxes each year. Click here for our special offer.