How do you know how much money to put away until you're at then end of the tax period and know the total tax amount? Do you just estimate based on what you expect to earn?
I'm from The Netherlands where taxes are probably a bit different, but for every invoice I send I take of the amount of VAT (21%) and put that to the side. After that I split the amount I have left in 2, so 50% goes to a savings account to pay income tax, and the other 50% is what I can spend/have left.
The 21% will always be less, because you also have to pay for other things that include tax. So that (should) never be higher. In the end you've put more aside then you have to pay so that's a nice bonus.
With regards to the income tax, in The Netherlands you pay +/- 37.1% till 68.507eu, after that you pay 49,50% for everything that is above the 68k. So if I put away 50% for every euro I earned I'm sure that at the end of the year I've got a nice bonus and don't have to pay more then I put aside. (For other dutch people, I'm using the new tax brackets that start in 2020.)
> Do you just estimate based on what you expect to earn?
I echo the advice to get a good accountant, but "estimating" is what I've been doing for the past 5 years. I had an unexpectedly good year a few years ago and wound up underpaying on my quarterly taxes. The IRS and the State of NY both charged me a small fine and I just sucked it up and paid it. It's quite a racket they've got going on considering income tax was supposed to be a temporary measure to get us through WWI.
