Minimizing your income tax bill is an important part of your financial plan. Many physicians either coming out of residency or moving from an employed position to one as an independent contractor aren’t aware of the need to pay quarterly estimated taxes.
These fools rejoice in the fact that they got to loan the government their own money interest-free for a period of up to 16 months! Instead, your goal ought to be to pay as few of your taxes as possible until the last possible moment.
Since no one is withholding your taxes anymore, you are responsible to pay them yourself. This includes your federal income taxes, your payroll taxes your state income taxes, and if incorporated, your state and federal unemployment insurance payments.
There are three big mistakes to avoid when paying taxes. The first, least serious mistake, is to pay your taxes earlier than you have to or pay more than you owe in the first place.
The second, more serious mistake, is to not pre-pay a high enough percentage of your taxes and thus owe penalties and interest. The third, that most commonly gets people into tax trouble with the IRS, is to spend your tax money on something besides taxes.