Last month, Jennifer shared the pros and cons of paying taxes monthly, and she mentioned something about letting her tax burden pile up. I believe that she is not alone in doing this, as it can be quite easy to simply “forget” taxes till the time that we absolutely must deal with them. I guess this is one of the perks of working for an employer. The company takes care of the taxes for you – computation, payment, and everything else.
For freelance writers, however, all the responsibility lies on our shoulders. If you opt to go the monthly payment route, you solve the problem of having to pay in bulk. It could be quite burdensome to go through the motions every month, though. What are you to do then?
Here’s a suggestion: pay quarterly or yearly, but make sure that you set aside money every month for taxes.
This will entail planning at the beginning of the year so you have a rough idea of how much to save each month. You simply need to estimate the percentage that you will have to pay and then set aside that much of your earnings from freelance writing monthly. When tax time comes, you will still have to go through all the paperwork, but you can rest assured that you will have more or less (hopefully more) money to cover everything. An added benefit of making this a habit is that, if you set aside more money than necessary for your taxes, you will end up having an extra savings account.
Anyone here who has been putting this in practice? Care to share your experience?