Realize that you are running a business and responsible for your own tax payments
The major difference between being an employee and working independently is that you are running a business. When you run a business as self-employed, through an LLC, through a corporation, YOU are responsible for all the tax payments. You are responsible for your own benefits, your own take-home pay after expenses and all the responsibilities of being the boss. If you don’t like the way things are being run, go to the mirror and meet with management.
The tax payments commonly called “estimated payment” confuse first-time independents. Most independent health care providers will run their business as unincorporated self-employed or as the only member of an LLC, as opposed to an S-Corp or C-Corp. Taxes are required to be paid quarterly for self-employed and single-member LLCs, but the term “quarterly” is messy to start with. It’s not a perfect 3 months due to the historical fiscal year of the government. “Quarterly” means that tax payments are made:
Quarter 1: April 15 for the earnings between January 1 to March 31
Quarter 2: June 15 for the earnings between April 1 and May 31
Quarter 3: September 15 for the earnings between June 1 and August 31
Quarter 4: January 15 of the next year for earnings between September 1 and December 31
To calculate this each quarter is easy only if you have steady earnings through the year which doesn’t happen in our world. Most of us have varying workloads, varying bill rates and then have a W2 job on the side. Sometimes you can only make a logical guess at what your total income will be at year end.
The goal is to accomplish one of two things. Either pay in at least 90% of your tax due each quarter OR 100% of the tax liability you incurred in the previous calendar year.
More to come …….