Painting Biz Owners: Avoid paying interest & penalties to the IRS by making estimated tax payments

IRS is a pay-as-you-go system, which means you are obligated to pay your taxes as you earn the income. If you're self-employed, it means making quarterly estimated payments. You want to pay in what you think you're going to owe. That can be difficult to know. If you're setting aside that 25 to 30%, you could pay that, or you could work with a tax professional to project your income and your tax liability, really dial in the amount of those payments so that you're only paying in what you have to. If you don't make those estimated payments, you just kind of wait —go to file your return, you're going to get hit with underpayment penalty, which is interest the IRS assesses on the estimated payments that should have been made earlier. So you're going to pay more taxes than you need to. You're going to have to write a giant check to the IRS, and that can be very difficult. Try to make some kind of estimated payment. You can do it on IRS.gov. Also, if you live in a state that has an income tax, you're going to want to make state estimated payments as well.