Pay-as-you-go Definition

The phrase "pay-as-you-go" indicates a payment methodology wherein debts are paid off as they are accrued, rather than on a predetermined payment schedule. In common use, it refers to some pay-for-service type devices such as cellular telephones where a long-term service contract is not involved (often known as pre-paid cell phones).

When used in reference to taxes, pay-as-you-go means that a business or individual makes regular tax payments throughout the year instead of making a single large payment at the end of the year. The pay-as-you-go tax system is currently the predominant scheme used by the US federal tax system, and it is implemented through routine paycheck withholdings.