As a freelancer, single business owner or independent worker, taxes can get a bit tricky. Instead of waiting for the traditional tax season during the months of March and April, it's in your best interest to pay the government in periodic payments. Since you do not have an employer who manages your taxes, Social Security and other benefits, per a W4 form, you will need to manage your books and determine how much you owe the government based on your business earnings.
One of the most important foundational elements of estimating your taxes is to be organized. Payments are split based on quarters, January-March, April-June, July-September, and October-December. Throughout each quarter maintain a file, electronically and via paper, and keep record of your profits, losses, expenses, etc. Set aside money regularly to ensure you have enough to cover the amount you owe. If necessary, you may need to consult a bookkeeper, accountant or tax preparer, particularly a professional who specializes in working with entrepreneurs.
Once your financial documents are in order, estimate the payment you think you will owe the government. If you consistently budget for taxes, submitting on time will be less of an issue. Read more in How To Calculate and Make Estimated Tax Payments.
According to the IRS, the payment schedule for 2016, 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 are not required to make the fourth quarterly payment due January 17, 2017.
To submit your payment, you have a few options including:
- Sign up for the Electronic Federal Tax Payment System, or EFTPS. The system allows anyone to pay taxes they owe. There is also a voice response system, in the event, the website is not available.
- Pay online via the IRS at www.irs.gov/payments.
- Pay using debit or credit card.
- Remit a check or money order using estimated tax payment voucher.
Quarterly taxes are not all bad if you plan for them. Mark your calendars, manage your documents, budget accordingly and send your payments in on time. Create consistent habits, especially as they relate to your tax responsibilities, to keep your business financially savvy throughout the year.