Saving for Taxes

saving taxes Aug 14, 2018

David Kats: Hi, this is David Kats and Dr. Michael Perusich for Therapist Consultants and we have a tip for you. You know you have to start saving for taxes sometime. You don't want your taxes to sneak up on you and always feel like you're behind the ball as far as getting taxes paid on time. You have to set up a tax account. Do you have set up a tax account?

Michael: Yes, we do. In fact, what I do just so it doesn't sneak up on me because boy, the year really flies by, and you're probably filing quarterly taxes. You want to just do this on a continual basis. What I do on my practice is I just have it automatically removed once a week. I have a certain amount taken out and moved right over to my tax account. I don't think about it, I don't physically have to do it. The way automation is today with our banking accounts and online banking and those kind of things makes it really, really easy to just slide that money over so it's there when the tax man comes.

David: You know you said something very important. You said that you did it on a weekly basis. If you think you're going to wait until the end of the quarter or the end of the year and have money that you're going to pay in your taxes, you're going to be sadly mistaken. I don't know anybody that waits longer than a month to withdraw the money that they put in their tax account. Here's what you do, go to the computer and figure your marginal tax rate.

Here's how you do it. Go just type in "marginal tax rate", Google it, and it will give you-- You put in how much you're going to make this year and it will tell you what your marginal tax rate is which is about how much you should withdraw from each deposit that you make so that you know you have enough for taxes. Then just put that amount, maybe let's say it's 15%, into your tax account once a week, just have it withdrawn, and when tax times come, you'll be happy.

Michael: Yes. Just to reiterate that, the way I do it is I look at my marginal tax rate and then I divide it by 52, number of weeks in the year. I go into my online banking, I set it to move money from my practice checking account over to my practice tax account, which is just a savings account, earns maybe a quarter percent interest or so of the nominal. It just happens every week. It's a small little chunk when you do it like that and you don't even notice it. Then, when it's time to pay your taxes, it's right there waiting for you.

David: That's right. Don't forget, set aside your taxes now, you'll be happier at the end of the year. This is David Kats, Michael Perusich. Thanks for listening.

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