Income Taxes & the Self Employed

17 Apr Income Taxes & the Self Employed

Those of us who are self employed don’t have regular paychecks from which income taxes can be withheld from each check we get.

We are expected to make quarterly tax deposits toward our expected liability, on pain of penalties for forwarding Uncle Sam too little prior to submitting our return.

With the ups and downs of most small businesses, budgeting is difficult, and setting aside tax money for that quarterly deposit is often a real challenge. It’s all too easy to put off setting aside money for the quarterly deposit or to dip into the money you’ve set aside for the deposit when some crisis arises.

There is an alternative that might help entrepreneurs avoid being caught short of funds to pay the taxes or being penalized for inputting too little.

Make a tax deposit each month.

The provision for making quarterly deposits is a convenience and a minimum.

There is no rule that says you can’t make a tax deposit more frequently than each quarter.

Make a deposit when the money comes in; set aside the government’s share before you even consider that it is yours to spend.

Just put your taxpayer number and the tax year to which the money is to be credited on the check. Make this part of your business life easier and save your energy for running your business.

And don’t wait for perfect information before making those deposits. An extension of time to file last year’s return shouldn’t slow you down in depositing an estimate for this year’s tax.

Image courtesy of Gerard Van der Leun.

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Cathy Moran, Esq.

I'm a certified specialist in bankruptcy law (California State Bar Board of Legal Specialization) practicing in the San Francisco Bay Area for more than 30 years. In addition to practicing bankruptcy law, I train new practitioners at Bankruptcy Mastery.
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