Benefits of Tax Accounts

Posted by: Rod Kurtz on December 18, 2006

Self-employed individuals and owners of pass-through entities (in which the owner, not the business is taxed) should use a "tax account" to accumulate funds for federal and state income taxes. Since these business owners are not subject to withholding, they may scramble to find the money at tax time. If you are in this category, here’s an easy solution: Create a money market or even old-fashioned savings account dedicated to this purpose. Putting aside a set amount of dollars throughout the year can help to avoid interest and/or penalties on tax underpayments that could result from lack of funds. It will also prevent you from depleting your main accounts in order to pay taxes owed. Talk with your financial adviser to find out how much you should save on a regular basis.

Barbara Weltman
President
BWideas.com Inc.
Millwood, N.Y.

Post a comment

 

About

Want to improve the way you run your business? Entrepreneurs, academics, and consultants from diverse industries offer practical advice on a variety of topics each business day.

To submit a tip for consideration, first check our archive of previous tips to make sure you're not repeating a tip someone has already contributed. Then send the tip to Small Business channel contributor Michelle Dammon Loyalka. Because of the volume of material she receives, she may not respond to each individual.

BW Mall - Sponsored Links

Buy a link now!