How to set up an escrow account for paying taxes
Escrow works with your real estate agent or the bank you are using as your lender.You will set up an account and the money in there is simply to pay your taxes when they are going to be due.Taxes can be overwhelming if left until they are due and you have to try and scramble up the money to pay them off.Escrow is designed to slowly save away money over the year to pay those taxes, that way the money is already there.
When you are setting up your mortgage payment you will talk to your lender about adding an escrow account that will pay your taxes.This means that your payment will be a little larger, but the helps you in the end.The money is untouchable for anything other than what it had been designed for.
There are other specialty escrow accounts that you can set up that can be used for a variety of things, but for taxes it is pretty standard to have an account attached to your mortgage.If you don't like that then most places don't require it, it is just something to aid you in your property purchase.
With your business you may choose to have this if you have a mortgage on your building.If you are already have a mortgage and you never had an escrow account set up then maybe you would be interested in talking with your lender to see if they can set that up.They will be glad to help you.
The money that goes in the account should be almost exactly what you will need for taxes and insurance, if you choose.So they will find out about how much you will need at the end of the year and split it into equal monthly payments.If there is too much or too little in the account when tax time comes then you will be notified that you need to pay a little more or that you will be getting some back.
If your business taxes are done by an accountant, then they should be more than able to help you set up and manage your escrow account.They will also be able to tell you about specialty accounts if your business would benefit from one.Maybe you could start putting money in one to use for employee bonuses this year!
Escrow accounts are a smart idea to a small business because there usually isn't extra money lying around during tax time.They can put your mind at ease knowing that you are going to be taken care of at tax time.They also can help you be sure that your insurance is paid in full and that you are covered if there should be any disaster to your business.
If you are not mortgaging your business, if you own it or are still going to have to pay taxes, then you can talk to your bank, or a local lender, and see if you can set up an escrow account for your taxes without a mortgage.They may find you an account that will work for you!
If you are just thinking about starting a business make sure that you take all of the taxes and insurance into consideration before so that you know what you are realistically are going to be paying.You don't want to get too far in over your head because you didn't think of everything!