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June 15 is just around the corner, which means there’s another quarterly estimated tax payment due. Just a quick recap, the estimated tax payments are due in January, April, June, and September. (With January 15 as the fourth estimated tax payment since it's for the Q4 of the prior year's estimated tax)
Quarterly estimated tax payments refer to money owed to the IRS to help make payments against the tax liability you're going to file for on April 15 or your extended deadline respectively. Unless you have a liability of less than $1,000, the IRS expects you to make payments along the way. This is in addition to your deputy payroll withholdings if you have a salary.
When you're on the payroll for W-2, those things are being held from your paycheck, then sent off by your employer, and paid along the way. When you're self-employed or have additional tax above what's being withheld, they want to see you making quarterly estimated tax payments.
Ultimately, it is your responsibility as a taxpayer to understand estimated tax payment liabilities and make those payments. This is not a burden that you have to carry alone as you can share the burden with the right tax pro. Still, it’s important to understand that it is your responsibility. And if you didn't pull it off the way you'd hoped in the current tax year, don’t worry as there's another one coming. And as you keep practicing and refining your process, you will eventually get into the rhythm that works for you.
In this episode, you will hear:
- What is a safe harbor method?
- The two scenarios for using the safe harbor method
- Setting money aside for tax when you’re using Profit First
- Adjustment of payments for estimates if you’re income increases or decreases by 40%
- Looking at all your income sources
- Slightly adjusted safe harbor for high-income earners
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