Stupid question I know, but like, do you just save up some money that you know you will owe at the end of the year? Or is there a way to go ahead and pay throughout the year? I dont really want to try to pay a huge chunk all at once... I want to know what is the method you use and whats best? thanks
Well, personally I just save a portion of my income each month to pay for taxes. But as to how you pay your taxes depends on the tax laws of the country and state that you are in because it varies. I believe some countries would deduct taxes from your salary monthly, some would do it after you submit your tax returns and some others may allow you to pay taxes in a few installments. If you are unsure with your portions, check with your local authorities.
If you are in the United States, you are expected to pay estimated tax quarterly to the IRS (and to some states, depending on where you live). http://www.irs.gov/businesses/small/article/0,,id=110413,00.html
Correct, you are required to make estimated taxes based on last years earnings (from self-employement or business) - so if you paid $10K in taxes on this type of income last year, you must make quarterly estimates of at least $2,500. If you make more this year, you will pay the additional amount when you file your taxes. If you didn't have any self-employement income tax last year, you can wait until you file.