Filing taxes can be frustrating, especially if you wait until the start of the New Year to go back and look at what you owe. If you run your own business, it’s a good idea to file your taxes quarterly, and the government may actually ask you to do so.
Paying your taxes quarterly helps you spread out your tax obligations over the course of the year. This is beneficial, since you are less likely to have surprises during the tax season. Even more positive is the fact that if you over pay, you could get a big refund at tax time.
Is it worth paying your taxes quarterly, or is it better to save and pay them all at once?
It’s certainly possible to pay your taxes all at once, but for the purposes of planning, it’s much easier to pay quarterly. Quarterly taxes are due on April 15, June 15, September 15 and January 15 each year. This cuts your tax obligation into fourths, which makes it more affordable.
If you run a business, paying quarterly allows you to estimate how much you owe based on your current expenses and profits. If one quarter’s earnings are much better than another’s, you’ll only pay your taxes in accordance to that data. If you wait until the end of the year, you could be caught off-guard if you had a great quarter followed by one that was slower, for example, and have to pay more than you thought you would.
You should think of paying your taxes quarterly like a method of saving. Some small business owners even pay monthly or every other month, so that they are as caught up as possible throughout the year. That way, when tax time does come, they only need to plug in the figures and see if they owe or will get money back for the year.
Your annual income can be used to estimate your quarterly payments. If your income goes down or up, you can adjust it as you go, making it easier to pay the Internal Revenue Service an amount as close to what you owe as possible.