Quarterly estimated taxes explained
The thing every new freelancer forgets about until April of the following year.
W-2 employees have taxes automatically withheld from each paycheck, so they never think about when taxes are 'due.' Self-employed people don't have an employer withholding for them, but the IRS still wants its cut on a regular schedule. If you wait until April to pay, you owe a penalty for underpayment during the year.
The four deadlines
- Q1: April 15 — covers January through March earnings.
- Q2: June 15 — covers April and May.
- Q3: September 15 — covers June through August.
- Q4: January 15 of next year — covers September through December.
How much to pay
Two safe harbor rules let you avoid penalties. Pay either (1) 100% of last year's total tax liability split across the four quarters, or (2) 90% of this year's expected tax. The first is easier — just take last year's tax bill, divide by 4, and pay that amount each quarter. As long as you hit that number, no penalty applies even if you owe more in April.
Paying the IRS
Use EFTPS.gov (free, direct withdrawal), the IRS Direct Pay tool, or mail a check with Form 1040-ES. Your accountant can also set it up on your behalf. State estimated taxes are separate and have their own schedules — check your state's department of revenue.
Put this into practice
Worth tracks your accounts, budgets, and goals — so the concepts in this article aren't just theory.
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