Quarterly Tax Payments For The Self-Employed: The Basics

Being self-employed comes with its fair share of advantages. However, ask anybody who has been self-employed for a significant amount of time, and they'll likely caution you about the hassle of paying taxes. If this is your first year bringing in an income as a self-employed worker, then you might be wondering what your tax responsibilities are; one of the most significant differences between paying taxes as a self-employed worker and as a "traditional" W2 worker is that you may be required to pay your taxes quarterly.

Do You Need to Make Quarterly Payments?

While not every person who is self-employed is required to make quarterly tax payments, most are. Specifically, those who expect to owe $1,000 or more when they file their taxes at the end of the year should be making quarterly payments. Failure to do so could result in penalties, interest, and other fees when you file--even if you pay your total tax balance due.

If you do not anticipate owing $1,000 or more--or if all of the following apply to you--you are not required by law to pay quarterly taxes:

  • you were a United States citizen all year
  • you had no tax liability for the previous year
  • your previous tax year covered a full 12-month period

When Are Payments Due?

While you might expect that quarterly tax payments would be spread out evenly every three months, this isn't actually the case. Exact due dates for each quarterly payment can vary slightly, but in general, you can expect to make payments every January, April, June, and September.

Tips for Paying Estimated Taxes

Paying estimated taxes can be tricky, especially if you don't have a consistent income throughout the year. This is where it can be helpful to use IRS Form 1040-ES to calculate your estimated payments. Throughout the year, it's also a good idea to track how much income you've made, in detail, each month. From there, you can base your estimated tax payments off your actual income for a more accurate payment amount.

In most cases, as long as you've made estimated payments on time throughout the year and aren't drastically off on your amount paid, you won't face any major penalties or fines when it comes time to file your taxes.

Dealing with estimated taxes is one of many trade-offs that comes along with being self-employed, but with a little preparation, you can handle your taxes with confidence. If you ever need further assistance with your self-employed taxes, contact a local professional who offers tax planning services.

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Do you prepare your own taxes each year? Have you received letters months after you have filed your taxes and spent your return telling you that you have made an error and that you owe the IRS a check to cover the discrepancy? This is something that has happened to me four times in the past eight years. Because of small errors, I have had to come up with money that I had to pay back and it made things more difficult than you might think. Since the last time, I have been paying to have my taxes prepared professionally and it has actually helped a lot. Find out what a difference a professional tax preparer could make on your taxes this year here on my blog.