Paying Estimated Taxes
If you need to submit payment for taxes to the government you need to become familiar with estimated taxes. This is something that the majority of people never deal with because their employer deducts the proper amount of taxes from each paycheck. But if you work for yourself or have a side job, paying estimated taxes is very important. If you do not pay these taxes you will find yourself owing a lot of money at the end of the year. This is a position that you never want to find yourself in.
How do I know how much to pay in estimated taxes? This is one question that holds back many people. The best way to do this is to take the prior year’s tax liability, divide it by four, and then pay that amount each quarter. This may not result in a perfect situation, but it will give you an idea of what you should be paying. Of course, you can make adjustments if you realize that you are going to earn more money this year.
Some people find that hiring a tax professional to set up estimated taxes is the simplest way to get started. They can supply you with all the proper forms, while also showing you how much to pay, where to send the money, and much more. Most importantly, a tax professional can answer any questions that you may have.
Estimated payments are due quarterly, which means you will pay four times per year. In addition to paying the federal government, you don’t want to forget about state and local taxes.
It may seem like a pain to pay estimated taxes, but if an employer is not deducting taxes (such as for a self-employed professional) this is something you have to do.
