Resume Writers & Estimated Taxes

If you’re a self-employed resume writer, then you are responsible for paying your own taxes. In contrast, if you work for someone else then taxes are automatically taken out of your paycheck. Depending on your annual income and your circumstances, self-employed iresume writers may be required to pay taxes on a quarterly basis.

Check with your accountant or refer to past tax returns to determine if you can pay annually or need to pay quarterly. There’s no disadvantage to paying quarterly. You can, on the other hand, be assessed fees if you decide to pay annually but earn too much (and should have paid quarterly).

The 1040ES is a form that will help you estimate your quarterly taxes. It’s available here –

https://www.irs.gov/forms-pubs/about-form-1040-es

You can also learn more information about quarterly tax payments and what is required here - https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes

Once you know how much you need to pay every three months, it’s time to create a plan to save for it. This isn’t your emergency savings plan. This is a different savings plan designed to take the financial pain and stress out of paying your taxes.

Step One: Where Will You Save The Money?
Unlike an emergency savings plan, your tax savings doesn’t need to be stored in a separate account. If you keep good records you can simply keep your tax savings in your standard business checking account. If you believe you might be tempted to spend the money, then open up another savings account specifically for your quarterly taxes. 

Step Two: Weekly or Monthly?
The easiest way to build your savings is to establish automatic deductions. For example, you may have $500 deducted from your business checking account each month and added to your tax savings account. To determine how much to deduct, simply divide your anticipated quarterly tax payment by three months or 12 weeks.

If you are keeping all of your money in one account, you’ll want to make sure you build up the amount in your account on a monthly basis so when tax time comes around you have enough money ready.

Step Three: Add It to Your Budget
Treat your quarterly taxes as any other business expense and incorporate your monthly tax savings into your monthly budget. By doing this, you’ll make sure that you always account for the expense and never fall short. When tax time rolls around you’ll be stress free and in the black.

Saving for your quarterly taxes may not be fun, and there are certainly other things you’d like to do with the money. However, by creating your quarterly tax plan you will remove the stress of paying taxes and you make sure you’re not hit with a large payment (and possibly even financial penalties) at the end of the year.

Ugh! Tax Day 2008

It's no secret that April 15 isn't my favorite day of the year. Not far behind it are Jan. 15, June 15, and Sept. 15 -- the dates that estimated taxes are due.

In talking with lots of other self-employed resume writers, they feel the same. There's just something about writing a hefty check to the IRS (and likely, your state department of revenue) four times a year (quarterly estimated tax payments) that's depressing.

At the gas station today, the clerk's sister came in bearing the clerk's finished tax return. She was getting a $700 refund. I think the last time I got a refund (at least one that I didn't have to apply to next year's taxes) was 1995 (the year before I started my business). A friend of mine is used to getting a $5,000 annual refund (he and his wife have a bunch of kids, which = tax deductions). Last year, he became self-employed for the first time. This year, he had to write a small check to the IRS. That's painful ...

Every year, probably like you, on April 15, I vow to:
1) Make more money next year (yes, I make this resolution on New Year's too)
2) Pay less in taxes by being smart with my deductions and contributions (for example, to my retirement account).

We'll see how it goes this year. But I got a head start by taking a look at this article about 2008 tax issues. I'll let you know if I come across any other good information throughout the year -- or feel free to post a comment on this thread with your suggestions.