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I hated taking tests when I was in school. I was a terrible procrastinator, and would wait until the very last minute to study. I’d stay up all night pounding energy drinks and staring bleary-eyed at my flashcards, as though looking at them long enough would burn the facts in my memory. By the next morning, I’d be stressed, nervous, and kicking myself for not preparing earlier.
Now that I’m older, I like to think I’ve gotten a little wiser. I try to plan ahead for things and not wait until the very last moment, especially for the really important stuff. I try and have my mortgage payment in before the first of the month and I always file my taxes well ahead of the date they are due. I want to make sure it gets to the IRS with plenty of time to spare.
If you are an owner-operator, paying taxes is a big change from the days when taxes were withheld from your paycheck as a company driver. It’s important to be diligent about how much money you set aside throughout the year. Since January through March are the slowest months of the year for freight cycles, having a big payment due at the end of those months can be a huge burden. Therefore, ATBS recommends that drivers set aside between 25 and 30 percent of their weekly net income for quarterly taxes.
Create an organizational system for your business, and make it a priority. Get all of your paperwork, tax documents, and your finances in order to start the year off right. It may seem like a big change at first, but setting aside money with each check can quickly become part of your routine.
Why is it important to pay your quarterly taxes?
If you fail to pay your quarterly taxes, you will be charged a late payment penalty. Let’s assume that you also failed to file – that’s another penalty tacked on to what you have to give to the government. The current interest rate is three percent, which will get charged on top of the amount you owe after all the penalties have been added on.
How much do you pay?
For owner-operators estimating taxes based on actual income is recommended since your income can vary significantly each month. You wouldn’t want to inaccurately estimate quarterly taxes and pay more or less than what is actually owed.
How do you pay your quarterly taxes?
You can pay your federal quarterly estimates online at eftps.gov. Many states now allow you to make payments online as well. Go to your state’s department of revenue website to see how you can make a payment. For convenience, there is another secure site where you make state and federal payments together. This site is officialpayments.com. The only downside is that they charge you 2% of what your payment total is.
Technically you have the right to wait and pay your taxes once a year, but is it really worth it? When it comes to taxes, I’d rather take small steps towards doing it right than hand over more of my hard-earned money.
If you have any questions about paying estimated taxes, call ATBS at 866-920-2827. One of their business consultant or tax professionals would be more than happy to assist you.