Paying Taxes as You Go

The federal tax system is what's called a pay as you go system. With holdings, there are only a handful of sources from which you can have taxes withheld. You're supposed to be paying taxes in the quarter in which you earn a real estate income. But with estimated payments, if you can do some good planning and actually get a reasonably close estimate of what your total tax obligation is for the year,. then you can make estimated payments. The extra 3.8% that may apply on certain passive income could also help people avoid underpayment penalties.