If you have ever been paid as a contract employee (1099) or run your own business you can empathize with this cartoon. While many W2 employees end up paying too much in taxes throughout the year by having too much withheld, there are others who pay nothing to the IRS at all. That is because if you are a 1099 or Schedule C filer, you must pay quarterly taxes into the IRS based on past or expected income tax amounts.
Not paying in timely fashion results in penalties and interest payments. This occurs often with celebrities, whether they are actors/actresses or professional athletes, but it could happen to anybody. It is easy for missed tax payments to spiral into tax debts and eventual financial ruin.
If you are constantly spending every dime you are making and then trying to pay the IRS in installment payments the following year, but missing those payments because you are constantly spending every dime, you can see where this will go.
It is essential to get ahead of tax payments and incorporate them into your overall financial plan.
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