It’s the Least Wonderful Time of the Year–Tax Time

It’s the Least Wonderful Time of the Year–Tax Time

Tax season is upon us my friends and that means your accountant is about to get truly stressed. You might be getting stressed too, but I hope not–that is why you pay accountants.

If you are anything like me, you hate giving Uncle Sam too much of your money.  But if you are small business owner working for yourself, you may not have withholding tax taken from your pay (I don’t). So what to do to make Uncle Sam happ(ier)? Quarterly estimated taxes.

Here is a post from that has a couple of really good hints:

Create A Separate Bank Account For Tax Payments

Create a separate bank account for payments. Then, move about 30 percent of your gross income into that account. Why 30 percent? This will keep you from spending money that the IRS might decide to steal – err, “collect.”

The 30 percent is there as a buffer, just in case you make a mistake about how much you owe. Keeping separate accounts also prevents you from accidentally floating checks or spending the money that you need for taxes.

Look To The Previous Year’s 1040

If you did your taxes with someone like Liberty Tax, H&R Block, or TurboTax, getting previous 1040s will be easy. If you used an accountant, it also should be fairly easy to get copies of previous returns. The only time you might have a problem, ironically, is if you did the taxes yourself and didn’t keep good records.

If your company’s adjusted gross income last year was $150,000 or less, look at your previous year’s 1040 “total tax” entry form. Now, subtract any expected withholding for wages. Divide that number by four, and then send in a check for that amount each quarter. Even if you end up earning more than you did in a previous year, you won’t be penalized by the IRS because this is considered a “safe harbor” payment.

If you are married, your spouse might hate you for taking nearly a third of your income and putting in a savings account, but this time next year, she/he may be loving you for being smart about tax payments.