| There are many good reasons to calculate or | | | | making an interest free loan to the IRS that you |
| estimate the taxes you will have to pay for the | | | | can't collect until you file your taxes next year. |
| year before you file your return. Below are two | | | | Getting Your Quarterly Installments Right |
| of the most common reasons you may want to | | | | If you are in business for yourself, you know |
| do so. | | | | your business better than anyone else. You know |
| Avoiding Too Much Withholding from Your | | | | whether cash flow varies or is steady throughout |
| Paycheck | | | | the year, and which seasons are more profitable |
| If you are an employee with a steady job and | | | | than others. |
| your cash flow is tight, you may not want to | | | | Your business budget should give you a |
| have too much withheld from your paycheck. The | | | | reasonable estimate of your profit or loss. From |
| withholding tables and schedules are set up to | | | | this budget, you can estimate how much tax you |
| protect people from coming up on April 15 with a | | | | will owe. As each quarter goes by, you can |
| big tax bill due. So instead, they have an | | | | recalculate your estimate for the year and |
| automatic overpayment cushion factored in when | | | | determine which method of calculating what you |
| your taxes are withheld. | | | | pay for any quarter, e.g. prior year tax due, |
| You can avoid this by simply increasing the | | | | current year expected earnings, etc., in order to |
| number of withholding allowances you claim. This is | | | | match up with your own cash flow and budget |
| entirely legal and appropriate and helps you avid | | | | expectations. |