3 Reasons to Make Estimated Tax Payments Quarterly
Most of us try to pretend that the April 15 tax deadline doesn’t exist for most of the year. Spending more time thinking about taxes — and filing them more frequently — probably seems like the last thing you want to do. But there are some benefits to paying out taxes quarterly rather than annually.
Paying estimated taxes quarterly can help lower stress and keep finances on track throughout the year for independent contractors and self-employed Texans. Let’s take a closer look.
1. Sidestep Financial Surprises
Making estimated tax payments quarterly can help you avoid financial surprises on Tax Day and force you to plan your family budget proactively. The IRS sets deadlines for each quarter (the next one will be Jan. 15, 2020). Having to check in and assess your budgetary and savings progress every three months keeps your finances top of mind and helps hold you accountable. More frequent financial check-ins also provide the opportunity to adjust your spending habits throughout the year, rather than retroactively recovering after a heavy Tax Day blow.
2. Avoid Paperwork Perils
Estimated taxes can also help keep you on top of your tax paperwork. It is a lot harder to hunt down the receipt for that deductible business lunch you had eight months ago than it is to find it a few weeks, or even two months, after it happens. The more you practice keeping and organizing the tax documents you need, the more you will be able to deduct from your taxes — and having to look through your paperwork every three months makes it easier to get in the habit.
3. Prevent Penalties
For some, making estimated quarterly tax payments is not optional. In situations where your employer or the government is not withholding a portion of your pay — think self-employment income, alimony, lottery winnings, interest dividends, etc. — you must file estimated taxes every three months. If you have paid less than 90% of what you owe for the year when the following January rolls around, you face a 5% penalty. On the flip side, if you are consistent in your planning and quarterly payments, you may find you owe very little — or even nothing — when Tax Day arrives.
Begin Budgeting
With these benefits in mind, you can decide if making estimated tax payments quarterly is right for your family and begin budgeting accordingly. As you start to plan, talk to your Texas Farm Bureau Insurance Agent about performing a 360 Review to help identify discounts you might qualify for or policies that could raise your deductible.
“If there is a way to adjust any coverages in a way that may reduce their premium and maintain their protection, we will be happy to do that,” says Bryan Sparks, a Texas Farm Bureau Insurance agency manager in Canyon. Be honest with your Agent about your budget, so they can ensure both your financial and insurance interests are protected.
Find more on managing your finances here.
Coverage and discounts are subject to qualifications and policy terms and may vary by situation. © 2019 Texas Farm Bureau Insurance
