If you are self-employed or own a small business, tax preparation in Jamestown, ND should also include future income projections and a quarterly payment schedule. This keeps your taxes current and simplifies filing when Tax Day 2018 arrives. Here are five reasons you should plan for quarterly payments and keep them current:
- Manageable debt: Tax Day is often dreaded because people do not know how much they might owe. This is especially true for freelancers and small business owners. Quarterly tax plans force you to track income and expenses all year while making tax payments as you go. This routine gives you a good idea of what you may owe at filing time, and sometimes, you may even see a refund! That definitely beats scrambling for funds so you can meet that large annual payment.
- Avoid penalties: Underpaying or failing to pay quarterly taxes results in a penalty at tax time. It is unlikely that unnecessary fees are an expense you want to pay, so make a quarterly plan and stick to it. If you have any doubt of what you owe one quarter, pay slightly higher. It is always preferable to receive a refund over a penalty.
- Forces organization: A good practice is to set aside 30 percent of your net income to pay quarterly taxes. You can calculate that each month and put it in a savings account until it is time to pay. The only way you can make this work is to be organized and disciplined. Every month, you must assess your gross income and expenses so you can determine the amount of taxes you may owe. Running in a constant state of panic will not help you in the long run with personal or business financial goals. Being organized and knowing what to expect each month and quarter is a better way to go. Also, if in the unfortunate event you face an IRS audit, you are more likely to avoid additional penalties if you can find the receipts and paperwork that back up the information on your tax forms.
- Less stress: Preparation turns tax time into a routine rather than a cause for anxiety. There will be no last-minute struggle to pay a giant tax bill and the organization quarterly reports demand also reduce your stress. Knowing what to expect—or at least experiencing less expensive surprises—has benefits for your state of mind as well as your finances.
- Smaller payments: It is easier to come up with several small payments than one large one. That makes the quarterly payments manageable. Even if you underestimated your quarterlies, you will still owe less at tax time. A smaller year-end payment also reduces your need for tax payment plans which cost money to enter and incur interest until you pay off the balance. You will no longer be in the ranks of the tax-pressured small business owners!
For improved tax preparation in Jamestown, ND and peace of mind, call Craig S. Hanson, CPA. We offer tax filing, quarterly bookkeeping and other services to keep your self-employment ventures running smoothly.