Debate with my accountant about quarterly taxes...

I was talking to my accountant last week and he said I should pay estimated taxes every quarter, but my buddy who's been freelancing for 10 years swears he just pays once a year and never gets hit with penalties. He says he keeps his money in a high-yield savings account and earns interest on it instead. Who do you listen to on this, the pro or the person with real experience?

3 comments

3 Comments

the_elizabeth7d ago

Have you ever noticed how everyone's got that one friend who's skated by for years doing stuff their way and never got caught... My uncle drove without car insurance for like 15 years until he got in a fender bender and it cost him his house. Your buddy might be getting lucky but the IRS has this thing called "lookback periods" where they can retroactively smack you with penalties and interest if they decide to audit you. I learned the hard way with my business that what worked for a friend usually doesn't work for me, especially when it comes to government money. Your accountant sees the whole picture of risk and law, while your buddy just sees his own small slice of luck. I'd say follow the accountant's advice now and save yourself the headache of finding out later if your friend's method stops working.

andrew_baker97d agoMost Upvoted

Your uncle drove without car insurance for 15 years" - so he basically played the world's longest game of chicken and lost when his luck ran out. And if you think about it, your buddy's "method" probably isn't even that clever, it's just working until it doesn't. I swear, half the people I know who brag about beating the system are one fender bender or one IRS letter away from a complete meltdown. People treat their tax returns like they're playing blackjack at a casino and forget the house always has the final say. Might as well ask your buddy if he's got a spare house to lose when the IRS comes knocking.

alext527d ago

Your buddy's been playing the odds and winning, why not you? One nasty letter from the IRS isn't worth docking your savings rate over something that might never happen, especially when that interest is real money in your pocket right now.