As a freelancer, solo business owner, or independent worker, handling taxes can be a bit complex. Instead of waiting for the traditional tax season in March and April, it’s a good idea to make periodic payments to the government. Since you don’t have an employer to manage your taxes, Social Security, and other benefits like you would on a W4 form, you’ll need to handle your own bookkeeping and figure out how much you owe based on your business earnings.
Being organized is key to estimating your taxes accurately. Payments are made quarterly: January-March, April-June, July-September, and October-December. Throughout each quarter, keep both electronic and paper records of your profits, losses, expenses, and other financial details. Regularly set aside money to ensure you have enough to cover what you owe. If needed, consider consulting a bookkeeper, accountant, or tax preparer who specializes in working with entrepreneurs.
Once your financial documents are in order, estimate the payment you think you’ll owe the government. By consistently budgeting for taxes, you can avoid issues with submitting payments on time.
For 2016, according to the IRS, the payment schedule is April 18, June 15, September 15, and January 17, 2017. If you file your 2016 tax return by January 31, 2017, and pay the entire balance due with your return, you aren’t required to make the fourth quarterly payment due on January 17, 2017.
You have several options to submit your payment:
– Sign up for the Electronic Federal Tax Payment System (EFTPS). This system allows anyone to pay their taxes and includes a voice response system in case the website is not available.
– Pay online via the IRS website.
– Pay using a debit or credit card.
– Send a check or money order using an estimated tax payment voucher.
Paying quarterly taxes isn’t too bad if you plan for them. Mark your calendar, manage your documents, budget accordingly, and send your payments on time. By creating consistent habits around your tax responsibilities, you can keep your business financially healthy all year round.
