Staying on top of your quarterly taxes can give you peace of mind—and save you money.
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by Connor Beaulieu
Connor is a content strategist, journalist, and legal writer living and working in Chicago. Over the past decade, he'...
Updated on: July 30, 2024 · 9 min read
Every year, millions of freelancers, gig workers, and corporations pay estimated taxes every quarter for income they've earned that isn't automatically subject to withholding taxes. By doing so, these people and organizations stay on top of tax payments throughout the year—and avoid the costly penalties and interest payments that come along with underpaying.
Generally, estimated quarterly taxes are due in April, June, September, and January of the following year, and taking the time to make these payments as accurately as possible can save time, money, and no small amount of stress for individuals and businesses alike.
Below, we'll cover not only when estimated tax payments are due but also which types of people and organizations need to pay them, how to calculate them, and what to expect if you underpay.
Every year, estimated tax payment deadlines fall on or around the 15th of April, June, September, and January, with small variations due to federal holidays and weekends. This year, quarterly deadlines fall on these dates:
Required payment deadline for any taxable income earned from Jan. 1 to March 31, 2024.
Required payment deadline for any taxable income earned from April 1 to May 31, 2024.
Required payment deadline for any taxable income earned from June 1 to Aug. 31, 2024.
Required payment deadline for any taxable income earned from Sept. 1 to Dec. 31, 2024.
As a general rule, estimated tax payments are generally required of anyone who earns income that isn't automatically subjected to withholding taxes. This includes, but is not limited to:
Self-employed individuals: All freelancers, contractors, business owners (including sole proprietors, members of a partnership, shareholders of S corporations), and other self-employed people who expect to owe $1,000 or more on their yearly tax return.
When you need to make estimated tax payments, it's important to be as accurate as possible when calculating how much to pay. Ideally, the total of your quarterly estimated taxes should equal at least 90% of what you owe by year's end or 100% of what you owed in the previous tax year (this increases to 110% for married couples making more than $150,000 per year or individuals making $75,000).
Fortunately, calculating payments only takes a few easy steps.
This first step is one of the most important when trying to pay quarterly estimated taxes but it can be done in several ways. To begin, take your income taxes from the previous year to identify a baseline. Then, factor in any changes in workload, rates, or projects you expect to happen throughout the year.
By comparing last year's taxes to the amount you can reasonably expect to earn from the projects due during that quarter, you can land on a relatively accurate payment.
For those who make more or less at different times of the year, remember to consider such fluctuations when calculating income.
Once you have your net income, deduct any business-related expenses you expect to pay, such as office supplies, internet bills, software, car mileage, or even a portion of your rent. Again, this is where a previous tax return can help, and maximizing deductions can dramatically lower the quarterly taxes you end up owing.
After you've established your expected adjusted gross income for the year, use the 2024 tax rate to determine your total tax liability. When doing so, remember that freelancers pay an extra income tax of 15.3% for Medicare and Social Security purposes.
If you expect to be owed any tax credits or to have some of your income subjected to withholding (such as with individuals who earn both W-2 income and 1099 income), make sure to deduct those amounts from your total tax liability for the year.
Now that you have your total yearly expected tax liability, simply divide by four to determine your quarterly payment amounts. For individuals with income sources subject to seasonality or other fluctuations throughout the year, you can change these payments individually to better match busy and slow periods.
Even the best estimates can be thrown for a loop by unexpected projects, new opportunities, or unusually slow seasons. When this happens, feel free to adjust and update your estimates to account for those changes. If you fail to do so, you may suffer an estimated tax penalty despite putting in all the effort to make accurate quarterly payments.
While calculating your quarterly taxes may seem daunting, the actual process of making those payments is nearly identical to paying normal taxes—with a few key differences.
When it comes to paying quarterly taxes, the process is slightly different for individuals and companies. Specifically, individuals will need to obtain and complete Form 1040-ES, or "estimated tax for individuals." Companies, on the other hand, will need to obtain and complete Form 1120-W, which is similar in many ways but differs in the types of deductions available and guidance for calculating taxes in general.
Both forms can be found on the IRS website, at your local IRS office, through many types of tax software, from tax professionals, and potentially at your local post office or library (though you should call ahead to ask).
In recent years, the IRS has gone to great lengths to make it simpler for individuals to pay taxes, both those due once a year and quarterly payments.
Online payments
Payment by mail
An important reminder for electronic payments
For those who opt for either the EFTPS or IRS Direct Pay, we strongly suggest setting up your account before your quarterly payments come due. To use the EFTPS, for instance, individuals need to complete a considerable enrollment process that includes verifying identity, bank accounts, and other information, all of which may take several days.
If you miscalculate your quarterly estimated tax payments for some reason, you'll end up with one of two outcomes: underpayment or overpayment.
If, at the end of the year, you've paid less than 90% of the tax you ultimately owed, less than 100% of your previous year's tax liability (110% for couples making more than $150,000 or individuals making more than $75,000), or owe more than $1,000 after applying all deductions, you may be hit with penalties or interest.
Penalties
Depending on the specifics of your circumstances, whether you're an individual or company, and the amount by which you underpaid, the IRS may decide to impose penalties. These vary on a case-by-case basis but can be determined using Form 2210, or "underpayment of estimated tax by individuals, estates, and trusts."
In some cases, however, individuals may be able to obtain certain waivers or exemptions to help lessen the blow of any penalties incurred by underpayment.
Interest
Even in the short term, the IRS charges interest on any underpaid taxes throughout the year. Although this interest rate is determined quarterly, it equals the federal short-term rate at that point plus 3%. Interest begins accumulating on each payment's due date and continues until the actual amount is paid in full.
Remember that you can perform mid-year adjustments to prevent ongoing underpayment. By doing so, you can limit the amount of taxes you owe on any miscalculated payments.
If, for whatever reason, you managed to overpay on your quarterly taxes throughout the year, you may be due for a payout from the IRS. Typically, this type of payout take the form of a refund or credit.
Refunds
Refunds earned through overpaying on your quarterly estimated taxes work almost identically to any other type of refund: when you file your tax return, you can opt to have the extra money returned to you through any of the same methods you'd use to pay.
While not ideal, overpaying and receiving a refund is often preferable to underpaying and suffering penalties or interest.
Tax credits
If you decide not to receive a refund, you can instead choose to have the amount you overpaid to be applied to next year's taxes. This may be less of a headache for some people, but it's important to factor in this type of credit when calculating the following year's estimated taxes in order to avoid a repeat of the situation.
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