Hello, it’s tax time. How do you make sure you don’t owe at year-end? It’s not too early to start thinking about your 2020 tax return.
If you’ve already filed your taxes this year, you might have been in for a rude surprise where you owed more money than you usually will. How can you avoid this so next time this does not happen to you? ‘Cause it’s so much easier when you pay up money up front than when you have to pay a lump sum of money at the end of the year and plus you don’t have to pay those pesky interest and being penalized for not making enough withholdings. So as a business owner, there are two ways that you withhold money: You either pay money to the government through payroll, which is payroll on the amount of money you pay yourself through W-2 Wages, and then the other profits you make from your business. And those profits you have to pay estimate taxes on that. So in this series of video, how to avoid owing taxes at year-end, we’ll be talking about how to complete your W-4 correctly so you don’t owe money at year-end, and we’ll also talk about how to pay the right amount of estimate taxes based on your income.
So when we talk about W-2 income and withholding the taxes on W-4, it’s not enough to just say, “Okay, I am going to claim zero.” Because if your spouse’s income or your second job or your profits put you on a higher tax bracket, you still would not withhold enough even after you have claimed zero. So claiming zero is just not enough if you’re in a higher tax bracket when you consider your other income. You know this is especially important for married taxpayers. You might be your spouse is a high-income earner, you have to consider income because that will affect your tax bracket when you’re filing jointly. And so, by making sure you’re withholding money at the right tax bracket, right, that way that’s a great way to ensure that year-end, you’re not faced with the surprise of how much you owe. And in addition to withholding money on your wages that you pay, you also have to consider estimated taxes.
So estimate taxes is what you pay on your profits not on your W-2 income. We just talked about W-2 income and now we’re talking about paying estimate taxes. So the future videos will show you how do you complete that W-4 correctly and how do you withhold estimated taxes correctly so at year-end, you’re just smiling because you don’t have that much more to pay. So if you like what you see in this video, you want more of this kind of video, please be sure to like my video or subscribe to my (YouTube) channel. Thank you for watching. I look forward to seeing you in the next video.