For most people, paying income tax happens automatically. You have a job and with every paycheck, some of the money gets held back by your employer and sent to the government. Since most people get paid a regular amount, these tax payments are the same every week or two weeks (or however often you get paid).
When you figure your taxes, you might end up with a refund, or you might end up having to pay a bit. But for the most part, there won't be any significant problems, because everything during the year took place on using a tortoise-beating-the-hare, slow-and-steady process. Some people have a different rhythm to their work lives. Instead of getting paid in regular installments from an employer, they have a more feast-or-famine existence which leads to fluctuating income. Maybe they own a small business that operates seasonally. Maybe they are a budding sports star who just got drafted and is looking at a big signing bonus. Or maybe they work freelance or on a contract basis, and see large payments when projects are done and have to live off those profits in leaner months. Whatever the particular reason, these situations can cause problems for figuring income taxes. Waiting until the end of the year and paying all at once can lead to large payments, and maybe even end up in delays that can induce penalties. For these people, there is an option called the annualized income installment method. Basically, this structure allows people to figure out their estimated tax based on an assumption of what they will earn for the year. They can then pay this in regular installments. It allows people with fluctuating income to pay their income taxes with less cost and hassle.Related or Semi-related Video
Finance: What is the IRS?19 Views
Finance allah shmoop What is the i r s Well
i rest might be the three most hated letters in
the alphabet Well after d m v a pms and
well maybe std The i r s is the internal
revenue service Their internal i e inside the government they're
in charge of collecting revenue A k a They take
money from your pocket in the form of taxes and
they deliver it to uncle sam and they you know
service you and it doesn't feel good So yeah these
are the guys from the us treasury department who checked
to make sure you filled out your income tax forms
correctly and submitted the proper amount And if you screwed
up in any way they will let you know about
it and a half in the form of angry letters
Phone calls knocks on your front door rocks through your
back window Whatever it takes to get you to pay
your fair share of taxes Like why should you get
away with not paying when the jones has paid all
they owed Or the irs can do even worse and
audit you with an audit he irs will request extensive
and very specific information and records from you Paycheck deductions
all kinds of things You claim that you did that
were deductible that may or may not have been forcing
you to spend hours upon hours at your public storage
unit digging through boxes you hoped and prayed you'd never
see again Well after the third solid week of having
your financial history poked and prodded like you've had to
turn your head and cough you uh might actually be
ready and willing to trade in those three letters of 00:01:35.13 --> [endTime] irs for rough one of those stds instead
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