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What the "Pay-as-You-Go" Tax System Means for You

Did you know that federal taxes are handled on a "pay-as-you-go" basis? That means you can't just wait until the end of the year to pay your entire tax liability. If you do, you'll likely face an underpayment penalty.

The good news is that most people meet the "pay-as-you-go" requirement through withholding from their wages. As long as you correctly fill out the withholding allowances on your W-4, you should end up paying the correct amount of tax through the year. However, for seasonal workers, independent contractors, and other types of workers, you may need to make estimated tax payments to satisfy this requirement. Due quarterly, estimated tax payments provide non-wage workers a structure for ensuring they stay up to date on their federal taxes owed.

Taxation Solutions, Inc. can help taxpayers who have experienced a significant change in income or a shift to contract work. Our team can assist you with estimated tax payments to ensure you don't get hit with a major underpayment penalty. Serving the Arlington area and beyond, our tax consultants are here to help keep you out of tax trouble and to resolve tax problems when they do arise. Give us a call today no matter what your tax needs may be. Our experts are here to help!