If you’re a gig worker, one of the areas you need to focus on is taxes. That’s because you won’t have them taken out of your pay like you would if you worked as a traditional employee. With the right tax savings goals, though, you can reduce any financial problems that can come from being unprepared for tax season. Here’s what to consider, so you can set (and meet) the right goals in preparation for paying your taxes.
What are Quarterly Tax Savings?
When you work for yourself, or you’re a part of the gig economy, the IRS wants you to pay taxes every three months. If you don’t make quarterly payments, you’ll generally have to pay a fee or fine when you file and pay your taxes in April. To avoid that, you make payments every quarter. There are two ways to do that, as the payment can be based on the amount you actually made for the quarter, or an average of the amount you expect to make for the year, divided by four quarters.
To hit your tax savings goals, it’s a good idea to put back some money every time you get paid for a gig. Generally, most people put back about 25% of what they receive. If you do that for every gig, you’ll have the money to pay your taxes when they’re due. Spending all of your gig money is probably more fun, but it keeps you from taking care of your quarterly taxes. You don’t want to get into trouble with the IRS, or worry about your finances as April 15th approaches. Saving and paying quarterly means peace of mind.
How You Should Plan for Your Quarterly Tax Payments
The best way to plan for your quarterly tax payment is to make it non-negotiable. In other words, don’t overspend when you get money from a gig, with the idea that you’ll make it up later. That doesn’t usually work very well. Before you know it, you’ll be behind on your savings and not have the money for your quarterly tax payment. Tax savings goals should be just like paying a bill, in that they’re something you do before you spend money on things that aren’t required.
If you put your 30% aside before paying any bills or spending any discretionary income, you’ll know the money is going to be there for you when you need it. Having money set aside to cover taxes, to pay for your retirement, and for other goals and dreams is a great way to keep your gig economy career on track.
Based on Your Expected Payment, Here’s How You Should Set Your Goal
When you know your expected payment (based on your expected income), you can set your tax savings goals. One of the best ways to do that is with tools that can help you, like indi for Jobblers.
With the Tax Savings Goal program from indi, you can more easily see what your goals are and whether you’re meeting them. That helps you make adjustments, instead of guessing and worrying about your finances. You can designate a percentage of each paycheck to go directly into your Tax Savings bucket so you don’t have to worry about moving money around.
The money in your Tax Savings bucket is always accessible, so it’s yours if you need it. If you dip into your Tax Savings, you can set a new goal to make up for those funds. This tool can help you manage your money as it comes in without ever taking it away. Tax time can be simple and easy with indi for Jobblers.
About the Author: Michelle Dakota Beck has worked as a professional freelance writer since the 1990s. During that time she has written everything from product descriptions to full-length books. Her areas of specialization include real estate, home services, legal topics, relationships, family life, and mental health issues. You can find her on WriterAccess.