Save for Taxes: Prepare Now to Avoid Stress in the Fourth Quarter
As we enter the year's fourth quarter, it’s time to start thinking about taxes. Tax season can often bring a wave of stress for small business owners, especially if you haven’t set aside money throughout the year. One simplest yet most effective strategy to avoid a last-minute scramble is to save for taxes consistently.
Why Set Aside Money for Taxes?
Many small business owners focus on day-to-day operations and may forget that taxes are an inevitable part of running a business. When tax season arrives, trying to gather enough funds to pay what you owe can lead to unnecessary stress and even financial hardship. Setting aside a portion of your income for taxes throughout the year ensures that you’re ready when payments are due.
Why the Fourth Quarter Matters
The fourth quarter is a critical time for tax preparation. By this time, you should have a clear idea of your business’s revenue for the year and can estimate your tax liability more accurately. Waiting until the final months to start preparing can lead to costly mistakes or missed opportunities for tax savings.
How Much Should You Save?
A general rule of thumb is to set aside 25-30% of your business income for taxes. This will cover federal, state, and local taxes and any self-employment taxes. If your income varies monthly, consider setting aside a percentage of each payment as it comes in, ensuring you’re always prepared.
Use Financial Tools to Help
One way to stay organized is to use bookkeeping software like QuickBooks Online, which can help track your income and expenses and even estimate your tax liability. Regularly updating your financial records ensures you have accurate data when it's time to pay taxes.
Plan Ahead, Reduce Stress
By saving consistently and planning, you can avoid the end-of-year panic. Don’t wait until the last minute—start setting aside funds today and ensure a smooth tax season.
DBR Bookkeeping specializes in helping small business owners manage their finances and prepare for tax season.
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