 The other thing that messes people up is the self-employment tax. When you're a W-2 employee, they take out Social Security and Medicare as well, and that is more of a flat tax. So when you report on a Form 1040, you don't really have to do any reporting much at all for Social Security and Medicare unless there's a problem. But if you're doing your own business, the government wants the equivalent of payroll taxes, which is Social Security and Medicare in the form of self-employment tax. That's another huge hit that people are just, it's just not in their mind much because that's just automatically taken out of their paycheck. And when you think of the Form 1040, you think about income taxes and people often miss the payroll taxes. So that's some reasons why people get messed up when they go into the Schedule C. And if you get behind on your tax payments, even if your business is doing well, that often is very damaging a start to a business. So keep that in mind. So an employee usually has income tax withheld from their pay. So if you're a W-2 employee, it's forced to come out of your pay. The employer is forced to be the tax collector and it's done in such a way. This is what I think the problem with our tax system is in a lot of ways, is that the government's trying to make things so easy, so automatic so that individuals are all employees rather than contractors, instead of having their own business, they're gonna be employees and then the employers are taking care of the system that people don't fully understand what is happening because they're not actively participating in the system. But at some point, you're gonna have to actively participate even if you're not a sole proprietor because at retirement, then at that point, you're gonna have to do your own taxes at that time too. So I think that's one of the inherent problems about the government trying to automate everything and trying to be more intrusive rather than having a self-report and an audit system, but that's my opinion. In my opinion and everyone's opinion. If you do not pay your tax through withholdings or do not pay enough tax that way, you might have to pay estimated taxes. So if you have a Schedule C business, you might have to pay using estimates because you don't have any W-2 withholdings. So estimated tax payments, you generally have to make estimated tax payments if you expect to owe taxes, including self-employment tax discussed later, a $1,000 or more when you file your return. Use form 1040ES to figure and pay the tax. Now you might say, well, what if I don't? What if I don't make estimated tax payments, you know, four quarters throughout the year? Well, then they're gonna hit you with the sticks, what I call their sticks, right? The penalties and interest. What's your goal for taxes? To pay as little taxes as possible and then pay them hopefully as late as possible too, right? So if they weren't gonna hit me with a stick, I would pay them as late as I could just from a cash management standpoint. That would make sense to do if I can manage my cash and pay them by April 15th of the following year, that's what I do, but I can't. Why? Because they'll hit me with a stick. I'll end up paying more money than I would have anyways because I'm gonna have to pay not only the taxes, they're gonna be charging me penalties and interest and my goal is to pay as little as possible. So if you do not have to make estimated tax payments, you can pay any tax due when you file your return. So for more information on estimated tax, you can see publication 505 if you wanna drill down on it in more detail. What are my options for paying estimated tax? You can pay your estimated tax electronically using various options. If you pay electronically, there's no need to mail in form 1040ES payments vouchers. So these options include. Now, before I go into the options here, realize that if you have a Schedule C type of business, you might be in a couple different scenarios. You might no longer be at a W2 employee and now you have a Schedule C business instead. That's your primary source of income. In that case, you're almost certainly gonna have to make estimated payments unless you're gonna run a loss on the business. If you have income that's significant, you're gonna have to make estimated tax payments in that situation. However, you might be in a situation where you have a W2 job and you do some gig work on the side. You're just picking up some side money in that type of situation. Well, in that case, your W2 withholdings, if that's all you have and you don't make estimated tax payments, the W2 withholdings are likely not gonna any longer be enough to cover the added income you're gonna have from the Schedule C business. So then you have a choice. You could increase the W2 withholdings in order to cover the added income that you have or you can have the withholdings from the W2 employee and make estimated tax payments for the Schedule C type of business. So those are some options that you have when you're thinking about that. So how could you pay them? You could pay them electronically. One, pay electronically through the Electronic Federal Tax Payment System, the EFTPS2, pay with direct pay by authorizing an electronic funds withdrawal when you file form 1040 or 1040 SR electronically. So when you file your taxes, your tax software you're using or your taxpayer software will have that often. Three, paying by credit or debit card over the phone or by internet. If you pay by credit card, I don't think the IRS charges you, but the payment might be charged from the credit card company. So an electronic transfers probably the cheapest way to pay them. If you go on to your account at irs.gov, then you can pay them pretty easily. Find your electronic payment options if you can connect to your bank. So other options include crediting and overpayment from your 2021 return to your 2022 return. So note that the estimates of your payments become more and more important going forward. And oftentimes it's really kind of sad when people get behind on their payment. They're paying employees and overpriced merchandise. Because if they start a new business, and it's doing well, but then they get behind on their payment, what ends up happening is by April 15th when they do their taxes of 2023, let's say for 2022 tax year, they're gonna owe the taxes and penalties most likely for tax year 2022. And then to get ahead of things, because now they got behind on things, they need to make the first quarter estimated tax payment for 2023, which is just a killer. It's just crushing them at one time because they didn't realize the significance of the taxes because I think they, because when you're a W-2 employee, oftentimes you're just not thinking about it because you're not actually participating in paying your own taxes. And so it's kind of a shock when you have your own business and people often get behind. So another way, if you have a refund coming from let's say your 2022 taxes, for example, you can either take that refund, say give me the money, or obviously you can roll it over and say just roll that in to my first quarter payment of tax year 2023. And then you can just pay the difference and keep rolling into 2023. So it's not too bad as long as you're ahead of things, but once you get behind on things, then it starts to steamroll a lot of people. And again, even businesses that would have been profitable, like they're doing good. And then, but they just didn't, they just didn't take this into consideration. They just don't want to believe it. What do you mean? I owe all last year and the first quarter. Yeah, well, it's cause anyway, or mailing a check money order, you can mail a check or money order with a form 1040 ES payment voucher. Penalty for underpayment of tax. So if you did not pay enough income tax and self-employment tax for 2022 by withholding or by making estimated tax payments, you may have to pay a penalty on the amount not paid. That's the point. That's what you're trying to avoid. The IRS isn't trying to be nice here. It's like, well, we're just trying to, we're just trying to make you pay as you go so that it'll be helpful to you. So we're trying to help you. No, no, they want their money earlier and they want it to be more likely that they're gonna get paid by making you pay them as you earn the money. And if you don't do it, they hit you with sticks. Not literally penalties and interest. And we're trying to avoid getting hit with the sticks. Not literally penalties and interest. So the IRS will figure penalties for you and send you a bill, or you can use form 2210 underpayment or estimated tax by individuals' estates trust to see if you have to pay penalty and to figure the penalty amount for more information, see publication 505.