When you’re self-employed, it could be challenging to determine your eligibility for tax deductions, which can make taxes burdensome! Freelancers also have to worry about paying quarterly tax payments, which must be made to the IRS four times a year, since they don’t have employers who withhold taxes from their salary.
Accuracy is now essential while filing taxes. Providing false or incomplete information can trigger an IRS audit, which could incur a fee as well. Even if you file your taxes and are entitled to a refund, the IRS may nevertheless assess a fine for late or insufficient payments.
How to avoid these fines?
The best course of action to avoid these fines is to carefully assess and quantify your charges. You must factor in your projected adjusted gross income, taxable income, yearly taxes, as well as any tax credits and deductions when determining your estimated tax payment.
The typical method for calculating your quarterly payment amount is to estimate how much tax you anticipate paying for the entire year and divide it by four. However, this approach is contingent on having a consistent source of funding.
An alternative method involves assessing your annual tax liability based on your earnings from earlier in the year. By making quarterly tax payments, you have the opportunity to reevaluate your earnings before the subsequent payment if you find that you have either overestimated or underestimated your income. Your irregular quarterly payments at the end of the year may require an explanation to the IRS.
Using intelligent tools to assist
If you decide on the first course of action, you can either use accounting software or spend countless hours reading over spreadsheets and keeping track of all your expenses.
Alternatively, you could automate your expenses. Using tools like FlyFin will help you accomplish this.
FlyFin’s quarterly tax calculator divides all of your expenses into the appropriate tax deduction categories using artificial intelligence. Also, the application ensures that you don’t pay more than you actually owe. Lowering the possibility that you might pay taxes in excess or erroneously.
When the deadline for the upcoming quarter’s anticipated tax payments approaches, FlyFin will give you a two-week head start to ensure that your taxes are accurately computed and delivered on time. On the other hand, you can always seek guidance when submitting a tax filing extension. You can get assistance with SECA taxes or self-employment taxes.
It’s important to keep track of your expenditures, but if you only use traditional bookkeeping methods, it might take a lot of time. Automating your spending is the best way to save taxes and boost savings.