As summer comes to an end, some things that have been put off due to the “summer mood” or because vacation agenda has the focus, have to be reviewed now before deadlines approach or external situations suddenly come up.
You probably still feel in the summer mood, but it’s important to keep these things in mind once summer ends to prepare for what’s to come.
- If your payroll is not withholding enough from your paycheck
- If significant income such as interest or dividends are received
- If you are self employed- You receive a 1099 rather than a W-2
- Capital Gains from investment sales or
- Significant Prizes and Awards
How should you pay in those taxes?
For occasional, one-time or very unpredictable income sources estimated taxes are paid quarterly-
- 1st Quarter (January 1- March 31): April 15th
- 2nd Quarter (April 1- May 31): June 15th
- 3rd Quarter (June 1- August 31): September 15th
- 4th Quarter (September 1- December 31): January 15th
Preparing for these payments are essential in keeping your budget stable.
Also, for those with an ongoing or a steady 1099/ Contractor type of income, there are easier ways to pay in your taxes during the year. Set up properly, these might also be able to save you substantially on your overall tax bill as well.
This approach keeps your taxes being paid during the year as the income is earned, but in smaller, more regular amounts than with Quarterly payments. This leaves you more nimble and able to plan based on your income and other circumstances during the year. With proper planning the tax saving can be significant, but certainly the personal pace will be satisfying.
Consider if you should start preparing for payments. This will relieve you of that Spring headache, giving you more control over planning and preparing in the best way. If you have any questions let us know and we’ll be glad to walk through your options with you.