A few days ago, I asked my accountant to make sure I was on track for my tax withholding for the 2012 year. To my surprise, i wasn’t 🙁
What I quickly discovered is that the better I do, the more I need to pay in (gotta love our system, penalized for working harder). The short story is that you need to be inconstant communication with your accountant. I made a big mistake in not communicating my changes to my accountant.
So, here’s what I recommend. First off, if you are a contractor, make sure that any time your rate changes, notify your accountant. My rate changed by $10/hr in Feb, and that threw off the calculations by quite a bit. To make things worse, I was also helping some clients remotely. All of this factors into a much higher tax payment. I always recommend working with your accountant because he can keep up to date if your tax bracket changes. For me, I hate have to come up with large sums of money in April, I try to pay my estimated taxes as I go. Even if you pay the whole bill in April (not sure if that’s allowed or not) you still need to be accruing money to pay that bill later.
Just as a side note, remember that in the US, the more successful you are, the more you are expected to be pay in taxes, and not just as a straight percentage. This is always a conflict in my heart. I strive to be successful and keep increasing my income in order to clear off all my debt and provide for my family’s future. However, I vehemently disagree with how the government chooses to spend my money, so my ultimate goal is to start checking out of the system. I want to pay off my debt, and build my homestead to be self sufficient, so that I can start to minimize the amount of money I pay in for taxes. If you haven’t read Atlas Shrugged, I highly encourage it. (for those of you without the diligence to read a 1000 page book, there is also a movie version that gives the same info. ha ha). So, my rant is over…
Just remember, keep in close contact with your accountant. You don’t want a major surprises in the middle of the year (or in March).
Still learning the hard way…
“Who is John Gault?”
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