Handling quarterly taxes can feel daunting for freelancers and self-employed individuals, but staying organized with tax return preparation and business accounting makes things much easier, especially regarding quarterly payments. Here, we’ll go over essential information on how to estimate, calculate, and submit your quarterly payments on time to help you stay compliant and avoid penalties.
In this article, you’ll learn:
✓ What quarterly taxes are and why freelancers and small business owners must pay them.
✓ Who needs to make estimated payments, including freelancers, gig workers, and business owners.
✓ Quarterly tax deadlines and how each payment period corresponds to your earned income.
✓ Step-by-step guidance on calculating and paying quarterly taxes, including deductible business expenses, self-employment tax rates, and payment submission methods.
✓ What to do if you miss a payment, plus when it’s best to hire a tax professional for help.
What Are Quarterly Taxes?
Quarterly taxes are payments that self-employed individuals, including freelancers, independent contractors, and certain small business owners, make to the Internal Revenue Service four times per year. These payments are estimated taxes for individuals who don’t receive any withholding, such as in the case of employment. Essentially, since self-employed individuals or freelancers don’t have an employer withholding income tax or Social Security and Medicare taxes from their paychecks, they’re responsible for making the estimated payments themselves throughout the year.
These payments cover your tax liabilities for things such as:
✓ Income tax, which is based on your total earnings after expenses.
✓ Self-employment tax, which covers your contributions to Social Security and Medicare (usually 15.3% of your net income).
Since the U.S. tax system operates on a “pay-as-you-go” system, taxes must be paid as you earn income, not just at the end of the tax year. If you skip the quarterly estimated tax payments and wait until you file your tax return, you could face penalties and interest for underpayments.
Who Needs to Pay Estimated Quarterly Taxes?
Not everyone is required to file quarterly tax payments, as it depends on your employment status and overall tax situation. However, if you’re earning any income outside of a traditional job, you’ll likely owe something every quarter. Here are some situations where quarterly taxes are necessary:
Freelancers and independent contractors: Whether you write, design, consult, or drive for a delivery service, you’re typically paid without taxes withheld. These earnings are often reported on a Form 1099-NEC or 1099-K, which means you’re responsible for handling your own tax payments.
Small business owners and sole proprietors: If you operate a small business or run a single-member LLC, your business income usually “passes through” to your personal tax return, meaning you’ll need to make estimated payments on that income.
Gig economy and side hustle earners: Even part-time or occasional income from rideshare apps, online sales, or freelance projects can trigger quarterly tax requirements if you earn enough over the year.
Investors and landlords: Income from rental properties, dividends, or capital gains can also require estimated payments if there’s no withholding.
Generally speaking, you’re required to pay quarterly estimated taxes if you owe at least $1,000 in federal taxes for the year after subtracting any withholding and refundable tax credits. Although there are a few exceptions, they are minimal, so it’s better to pay your quarterly taxes and receive a tax refund than withhold payments and receive penalties. Regardless, you should seek tax advice from a professional tax advisor to best understand your circumstances and how to make sure you pay your taxes correctly.
Quarterly Tax Deadlines (and What They Cover)
Each quarterly tax deadline corresponds to a specific period of income earned. Therefore, you must pay estimated taxes for the current year based on the following deadlines:
April 15: covers income earned from January 1 to March 31
June 15: covers income earned from April 1 to May 31
September 15: covers income earned from June 1 to August 31
January 15 (of the following year): covers income earned from September 1 to December 31
However, if a due date falls on a weekend or federal holiday, the IRS automatically extends the deadline to the next business day. For instance, if June 15 lands on a Saturday, the payment will be due on Monday, June 17.
How to Calculate Your Quarterly Taxes and Submit Payments
One of the most challenging parts about being self-employed or freelance is determining how much you’ll need to pay each quarter. Individuals with consistent incomes from year to year may be able to use their previous tax liability as an indicator for the current tax year, but this isn’t always the most accurate way of doing things (especially if your earnings fluctuate). Instead, move through the following steps to estimate how much tax you need to pay at each installment.
Step 1: Estimate your annual income (based on previous year or projected earnings).
Start by estimating how much you expect to earn for the year from all freelance or self-employment sources. If you’ve been freelancing for a while, look at last year’s total income as a baseline. If you’re new to freelancing, use your first few months of earnings to project what the rest of the year might look like. Keep in mind that this is just an estimate, and you’ll adjust your numbers later if your income changes significantly.
Step 2: Subtract business expenses to find your estimated taxable income.
Next, subtract all deductible business expenses from your estimated income. Some of the most common deductions include:
✓ Home office expenses (a portion of rent or utilities)
✓ Internet and phone bills
✓ Equipment and software
✓ Business-related travel or mileage
✓ Professional memberships, courses, or subscriptions
Your total income minus these expenses equals your net self-employment income, which is what you’ll be taxed on. So, if you earn $80,000 and you have $20,000 in expenses, your taxable income will be $60,000.
Step 3: Apply the correct tax rate (income + self-employment tax, usually around 15.3%).
Freelancers pay self-employment tax to cover Social Security and Medicare contributions. This tax is 15.3% of your net income (12.4% for Social Security + 2.9% for Medicare). However, you can deduct half of your self-employment tax when figuring out your total income tax, which helps lower your taxable income slightly. So, 15.3% of $60,000 = $9,180 in self-employment tax, and half of that ($4,590) can be deducted when calculating your adjusted gross income (AGI).
You’ll also need to calculate your federal income tax based on your AGI. This can vary based on your filing status and tax bracket, so it’s essential to make sure you keep an updated 1099, especially if you experience any significant life changes.
For this example, let’s say you’re single and your AGI after deductions is around $55,000. This would make your federal tax rate between 12% and 22%.
Therefore, $55,000 x 15% (average rate) = $8,250 in income tax.
You then need to add the income tax to the self-employment tax to determine your total estimated annual tax. In this example, it would equate to $17,430.
Step 4: Divide by four for your quarterly payment amount.
Once you have an estimate of what you owe for the year, all you need to do is divide that by four to determine your estimated quarterly installments. In this example, that would equate to $4,357.50 per quarter. If your income fluctuates, however, you can adjust the quarter’s payment based on what you actually earned, as the IRS allows you to make uneven payments as a self-employed or freelance individual.
For a simpler method, you can download Form 1040-ES directly from the IRS. This is a worksheet that helps you calculate your quarterly payments.
Step 5: Submit your quarterly tax payments to the IRS
Once you’ve calculated how much you owe, the final step is to submit your quarterly tax payments to the IRS. There are several ways to do this, depending on your preference:
✓ IRS Direct Pay online
✓ Mailing payments with Form 1040-ES via post
✓ Electronic Federal Tax Payment System (EFTPS)
You can find a more detailed explanation of quarterly taxes online at the IRS website and more information on submitting payment here.
When to Hire a Tax Professional
If you happen to miss a quarterly payment, don’t panic. The IRS typically charges a small penalty and interest for late or underpaid amounts, which can add up over time if not addressed. The best thing to do is make the payment as soon as possible and adjust your next installment to stay on track.
Managing self-employment taxes can feel overwhelming, especially when your income fluctuates throughout the year. That’s where the experts at Del Real Tax can help. Our team specializes in helping small business owners stay compliant, minimize tax liability, and plan smarter for the future. Contact us today to learn more or book a demo so you can get ahead of the upcoming tax season.
