People who are self-employed or receive substantial income from an employer that is not required to practice payroll withholding (such as lawyers and owners of rental property) are required by the IRS to estimate their tax liability and pay their taxes in advance in quarterly installments.
Estimated taxes are a critical component of managing finances for self-employed individuals. By making estimated tax payments quarterly, self-employed individuals can ensure that they do not owe money to the IRS at the end of the year and face potential penalties or interest charges.
1. Paying estimated taxes helps self-employed individuals plan ahead financially. 2. Making regular payments on time allows them to evenly distribute their financial burden throughout the year