How To Effectively Save For Quarterly Taxes As A Self-Employed Person

Quarterly Taxes
March 5, 2021
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There are plenty of great advantages to being self-employed, but there’s one word that often strikes fear into the heart of many freelancers – taxes.

Working out how to save for quarterly estimated taxes can feel like the biggest struggle that you can face as a freelancer. Those three-month deadlines always seem to roll around way quicker than you might expect. 

Rather than panicking as your quarterly tax bill is due, it’s time put in place a plan of attack for dealing with them head-on.  

Finding a system that works for you

The key to saving for your taxes is working out a system that you can stick to. It might take a while to get your system sorted, but this is well worth the effort. The first time I got a quarterly tax bill and had all the money set aside, it felt great. But that moment took years of being self-employed to achieve.  

Don’t feel bad if your system doesn’t stick right away. I’ve fallen off my tax savings wagon quite a few times, and while it’s not a great feeling, I know I have a system to back me up. All I need to do is remember to implement it.

These are the tips that work for me. 

Set aside around 25-30% of your income 

It might sound obvious, but getting into the habit of setting aside a percentage of your income for taxes is an efficient system, and it works.

When you’re an employee, your tax deductions are based on a percentage of your income too. Granted, someone else does the calculations for you, and that tax money never lands in your account, but the theory is the same. 

As a self-employed person, you might need to do some calculations to figure out the exact percentage that suits you and your business, but once you’ve done that you’re good to go. If you’re not sure where to start, look at your tax returns for the last couple of years, and work out what percentage of your net income was made up by tax payments.     

A book that helped me wrap my head around organizing myself to pay taxes, rather than burying my head in the sand, was The Money Book for Freelancers, Part-Timers, and the Self-Employed, by Joseph D’Agnese and Denise Kiernan. 

This book was recommended by a very successful freelance writer I admire. I had the sudden but scary realization that, unlike her, I had no strategy for saving or paying for taxes. At all. That was a wake-up call and made me realize that if I wanted to be successful too, I needed a system. 

Use a dedicated account for taxes 

Keeping money for taxes set aside in a completely separate account from any other funds is a really good idea. If your online banking allows you, call your account something that makes you smile, but also reminds you that money isn’t yours. My tax account is called “Can’t Touch This.” For freelancers too young to remember, that’s the title of a song from 1990, which makes me feel pretty old now. 

As tempting as it might be to dip into your tax savings when you hit a lean month, if it’s in a separate account to your holiday funds or other savings, you’re going to think twice before clicking that “confirm transaction” button. 

I use Wise (which used to be called TransferWise), which allows you to set up unlimited “jars” for savings. I often get paid through Wise anyway, as you can set up local bank accounts in lots of different currencies. It takes me seconds to calculate and transfer a percentage of each invoice into my tax jar. Then I can transfer the remaining funds to my regular checking account. 

Use money management systems 

Financial tools can help you analyze your spending, create a budget, and even track your investments. By keeping everything in one place, you can check to see if you’re on target with your tax savings quickly and easily. 

Finding time-tracking software, accounting programs, and the right business banking accounts all helps to streamline your systems and make figuring out how much to set aside for taxes less of a headache. 

Cash-flow issues are cited as a common reason for businesses to fail. How you choose to operate your business the first few years after launch will be critical to its long-term success. Starting off strong, by getting into the mindset of a business owner, and taking control of your finances is a great way to start!  

Pay your estimated taxes on time

Estimated taxes are due quarterly, although those quarters don’t line up exactly with a calendar year! In the US, the payment deadlines are:

  • April 15
  • June 15
  • September 15
  • January 15 of the following year 

While you can opt to pay your taxes once per year, working out how you’re going to pay that huge bill is even scarier than sitting down and working out a system to get those quarterly tax bills paid on time. 

Remember to save any relevant receipts and deduct those expenses, including anything that helps you run your business. 

Working with an accountant can save a lot of time and effort when it comes to filing your taxes. They know exactly what can and can’t be deducted, and will complete your quarterly returns far more quickly than most of us can do them ourselves! It can be tempting to think we can do everything ourselves, but knowing when to seek help is a strength, not a failure!

The two main things I outsource are taxes and website design. I used to think I should be able to do these myself, and spent hours trying to get to grips with tax returns and WordPress updates. Quickly calculating how much I could have earned in these “lost” hours made me realize that even if I paid someone else to complete those tasks, I’d still be better off than if I tried to do them myself.

Building successful habits 

Just like anything, getting into the new habit of setting aside a percentage of your income takes time. It’s estimated it can take between 18 to 254 days for a new habit to stick. Keep following your new system in the confidence that it’ll soon become second nature.  

Making wise decisions when it comes to setting aside money for taxes means we’ve got more time and energy to dedicate to building our businesses and making them successful. Which is what we’re all aiming for, after all.

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Despite all the rags to riches stories you see on Facebook and Instagram, successful investors didn’t achieve their success overnight. Investing is a long game and there are plenty of opportunities to fail along the way. It is similar to chess in the sense that it takes minutes to learn the rules, but a lifetime to master.

How to Manage Efficiently While Remote

Remote operations have become a familiar feature of our digital landscape. What can managers do to help balance both the advantages of remote work while maintaining high efficiency?

What Start-Up Businesses Need to Know About Intellectual Property Law

The early stages of a new business can be a bit taxing and strenuous. During these times, it may be challenging to set up your intangible or intellectual property assets as well.

15 Direct Mail Marketing Ideas for Beginners

Despite the popular marketing online and on social media, direct mail marketing still remains one of the most powerful strategies you can use to grow your business. If you’re willing to learn the most innovative corporate gifts for clients or the best products to give as freebies or as an employee anniversary gift, you’ll discover them here.

Online Courses for Entrepreneurs. Do They Help?

Entrepreneurs often wonder whether online courses help. The short answer to this question is yes. They help to get the training needed to successfully manage eCommerce businesses. eCommerce courses are focused on launching your startup by focusing on digital marketing strategies and other entrepreneurial skills.

How to Create a Successful Business Idea in 2020

You might be thinking of great business ideas all the time. You might make plans, search for tools, research competition, and make all the necessary moves to implement your ideas. However, at the same time, you might have a hard time finding one idea that sticks out the most.

Taxes That Need to Be Deducted From Employees’ Paychecks

Taxes That Need to Be Deducted From Employees’ Paychecks

An integral part of running a business involves the complex dance of payroll taxes. As an employer, it's a legal responsibility to deduct certain taxes from an employee's paycheck. Understandably, it may seem like navigating through a maze, but the core components of...

The Impact of Steel on The American Economy

The Impact of Steel on The American Economy

Steel is a crucial construction material with a significant impact on the American economy. The World Steel Association predicts increasing demand for steel in the 21st century, driven by the construction sector and its eco-friendly nature. The manufacturing sector, employing millions of workers, relies heavily on steel production. As the steel industry moves towards digitalization, there is a growing need for low-carbon steel. The global reach of the steel industry has transformed international trade and commerce, creating economic interdependence among nations. To secure its future role, the steel industry must address workforce transformations, adopt cleaner production methods, and invest in material science and research.

Legal Essentials for Online Entrepreneurs: Insights from Business Lawyers

Legal Essentials for Online Entrepreneurs: Insights from Business Lawyers

The blog “Legal Essentials for Online Entrepreneurs: Insights from Business Lawyers” offers crucial advice for online entrepreneurs. Business lawyers provide insights on vital legal aspects, such as forming a business entity, protecting intellectual property, drafting contracts, and complying with online regulations. Understanding these legal essentials is essential for safeguarding the business and avoiding potential legal pitfalls that could arise in the digital marketplace.

Overdue Financial Moves You Need to Make Now

Overdue Financial Moves You Need to Make Now

If you've been procrastinating on tackling some essential financial actions, now is the time to take action. Today's article will emphasize three crucial financial moves that are long overdue: jumpstarting your retirement investing plan, formulating an estate plan,...

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Recent Posts

How to Give Your Employees More Choices in Benefits

How to Give Your Employees More Choices in Benefits

As a business leader, you understand the value of empowering your team with choices that suit their unique needs. This philosophy can extend to the realm of employee benefits, where providing more options can enhance job satisfaction and loyalty. Here’s how you can...

How to Reduce the Burden of Healthcare Costs in Retirement

How to Reduce the Burden of Healthcare Costs in Retirement

Planning for retirement involves more than just financial considerations; it also requires thoughtful preparation for healthcare expenses. As you transition into your golden years, managing healthcare costs becomes crucial for maintaining financial stability and...

How to Avoid Delays When Delivering to Customers

How to Avoid Delays When Delivering to Customers

In today's competitive business landscape, delivering products to customers on time is not just a courtesy; it's a necessity. Delays in delivery can lead to dissatisfaction and harm a company’s reputation, especially for female entrepreneurs who are striving to build...

Work Remotely Without Working from Home

Work Remotely Without Working from Home

Working from home offers a unique blend of comfort and convenience, creating a workspace that is both personal and professional. Your home becomes a versatile canvas where productivity meets comfort, and your creativity flourishes in familiar surroundings. From the cozy corner of your living room to a dedicated home office, the possibilities are endless. With the freedom to choose your workspace, you can design an environment that suits your workflow, whether it’s the tranquility of a quiet room or the vibrant energy of a sunlit nook. Working from home provides the flexibility to customize your surroundings, making it the ideal place to turn your aspirations into accomplishments.

Why You Need to Avoid Overworking Yourself

Why You Need to Avoid Overworking Yourself

The demanding landscape of entrepreneurship often celebrates burning the midnight oil as a pathway to success. While hard work is undeniably critical, overworking oneself can lead to adverse effects that are often overlooked in the hustle to meet deadlines and...