Taxes And Tax Refunds For The Self-Employed: Benefits And Drawbacks

There is a lot to be said for being self-employed. You are in full control over how much money you make, and when you work. You can take time off whenever you need to, and you can answer emergency calls about your kids without facing punitive measures for leaving work. There is just one thing; taxes. There are a couple of ways you can manage your taxes, but each has its own benefits and drawbacks.

Saving Nothing for Taxes All Year

You can absolutely avoid saving money for taxes all year. This allows you to have a lot more cash on hand when you need it most and not have to be at the mercy of emergency situations. The problem is, doing your self-employment taxes this way essentially gives you your refund up front all year long, and then you are stuck with an enormous tax bill when you file your taxes. Still, you can make life easier and more comfortable this way, and you still have the option of a payment plan for that tax bill next year.

Stashing the Tax Money Every Month

Of course, you could go another direction with your taxes and save about $200 a month every month until tax time. This will give you at least enough money to make a sizable payment on anything you owe the IRS and your state's revenue department. If you owe anything more beyond that, it should still be manageable with a payment plan. Most people who look at doing self-employment taxes this way know that they will never get a refund, unless they owe very little. Then the excess money they saved all year to pay the tax bills is their refund. 

Another drawback to stashing money to pay taxes is that you have to figure out how much you should be putting away. Yes, you can stash a minimum of $200, but if you want to save money and not pay the fee for a payment plan, you need to pay the bill in full. Tax preparation services can help you calculate an accurate amount to put away. If it is difficult and financially painful to put that much cash into a savings and leave it sit, just think about the fact that you will save yourself some hefty fees, and you get to keep any excess. It is akin to paying both yourself and the government at the same time. Contact a CPA, like Hough & Co CPA , for more help.

About Me

The Role Of Business Accountants

My name is Michael Winters and if you own a business and you don't have an accountant, you should read my blog. I didn't realize the importance of an accountant until my sister opened up a small business. She told me that she was going to hire an accountant and I wanted to know why. My sister explained why the duties of an accountant are essential for running a business. She explained that hiring an accountant was necessary for many things including getting a business started, for budgeting and to handle tax audits. After speaking with my sister, I did some research on my own to learn more about this type of job and the duties of accountants. After learning about the important role they play in a business, I wanted to share the information in a blog.



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