Friday, July 9, 2010

Be Financially Free AND Responsible- Estimated Tax Payments

Do you make Passive Income? Are you earning any non salary income? So what do you need to do about this Abundance?

Wouldn't it be nice to pay your income taxes on time with the ease and grace of the King Archetype? Here's how...

Everyone is required to pay income tax as they earn the income, either as withholdings as an employee or from self employment tax.

Do you know what Estimated Tax Payments are?

Estimated tax payments are just that. They are pay-as-you-go tax payments based on what you estimate to earn for the year, usually paid on a quarterly basis. And ultimately, the payments have a hidden benefit as they keep you from falling behind on your and help you avoid the pain and suffering of a tax crunch come April 15th..

You may be charged late fees and penalties for not making at least 4 payments throughout the year by each deadline AND if you underpaid your tax (ie your estimated payments were below what you actually made during the tax period).

So who needs to pay?

Estimated Tax Payments are not just for people who own their own business. They are also for people with passive income. If you have any income that is received without income tax withholdings then you must pay Estimated Tax Payments. Examples of non employee income come from: earnings from your small business, side work as an independent contractor, other income from interest, dividends, rental properties, alimony, etc.

How do you pay?

The Estimated Tax Form, Calculations, Payment Stubs, Mailing Address & Instructions are available at:

Saving vs. Paying Quarterly?

Some people prefer to save their tax payments in a high yield interest bearing account, instead of paying quarterly to the government. Officially, this is not inline with IRS regulations. As stated above, you are required to pay your income as you go, but if at least part of your income has withholdings and you don’t have any past or present red flags you may slip under the IRS radar. Saving is beneficial if you are responsible to save the correct amount and trust yourself to not spend it when crisis calls. If you don’t trust yourself yet, it may be smarter to pay it quarterly to the IRS.

Avoid late fees and penalties and all the unnecessary stress and anxiety of needing to scramble at the end of the year to pay your taxes. Be smart, pay your taxes throughout the year.

If you have questions post them here as comments. If you want assistance setting up a system to take back your life from crisis choices and the anxiety and dread of woes-me thinking or you want coaching to make better choices that feel good and empower yourself to live the life you dream of, then contact me. Today is the best day to start- you are worth it!

Be financially free AND financially responsible-- Save before you get stuck.

Tye Kirk
Know your Numbers, Live Rich!

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