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Whether or not you’re new to self-employment, it can be overwhelming to understand and pay quarterly taxes.
It’s important to remember that when you are self-employed, no taxes are withheld from your income. As a result, self-employed people are generally responsible for quarterly taxes, also known as estimated tax payments. If you’re expecting to pay quarterly taxes, bookmark these dates! Payments are due on April 15, 2024; June 17, 2024; September 16, 2024; and January 15, 2025
We’re here to help you figure out if you need to pay quarterly taxes, how to calculate them, and more. Let’s dive in!
Quarterly taxes (also referred to as estimated taxes, estimated quarterly taxes, and estimated tax payments) involve paying taxes as you go.
Remember, as a W-2 employee, you do the same thing except that taxes are withheld from every paycheck. So technically, you pay taxes about 25 times a year as a regular employee. “Tax day” is really just for “settling the bill,” so to speak—either paying the remainder of your tax bill, if you underpaid throughout the year, or getting a tax refund, if you overpaid throughout the year.
For self-employed workers, the process is similar: four times per year, you pay a quarter of your expected tax bill, rather than just a single payment at the end of the tax year.
When you pay quarterly taxes—or any taxes as a self-employed individual, there are a few types of taxes included:
Self-employment taxes cover your payments toward Social Security and Medicare. Unlike employees—whose employers withhold half of these taxes from their paycheck and then match them—when you are self-employed, you are responsible for the total amount.
If you have more questions about self-employed taxes in general, check out our complete guide to self-employed taxes (or just bookmark it for next April!)
Most self-employed people (a.k.a. freelancers, independent contractors, small business owners and gig workers) are expected to pay estimated taxes—especially if self-employment is your sole source of income. If you’re in doubt, it doesn’t hurt to pay quarterly taxes anyways!
The IRS expects you to pay taxes as you earn income. If you end up underpaying during a tax year (via withholding or estimated quarterly payments), the IRS may charge penalties on late payments. Paying quarterly tax payments also helps you avoid getting hit with a huge tax bill in April.
If either of the following apply to you during the year, you may have to pay quarterly taxes:
There is one exemption to having to pay quarterly taxes, even if you are self-employed.
Suppose you had zero tax liability for the previous year, as long as it covered a 12-month period, and you were a U.S. citizen or resident for the entire year. In that case, you are not required to make estimated tax payments in the current year.
If you have self-employed income or 1099 income, but also work as a W2 employee (i.e. as a full or part-time employee for an employer), you can also increase your tax withholding through your employer to cover the amount of taxes you’ll owe from your self-employed taxes. If you choose to do this, we recommend consulting with a tax professional first to ensure this is a good option for your circumstances.
The IRS recommends that self-employed workers use Form 1040-ES to calculate their estimated quarterly tax payments. This process is pretty simple and can be completed in four easy steps:
Feeling a bit confused? Let’s walk through an example:
Step 1. Let’s say you drive for both Doordash and Uber, and between the two, make about $900 pre-tax each week. So for the year, your estimated taxable income would be $46,800.
Step 2. Now you’d need to adjust that estimate for any deductions or credits from your overall income. If you’ve been using Everlance to track your mileage and deductions, this should be easy—just go to the Tax Center and have a look at what your deductions and mileage are so far and use those to estimate. Let’s say that after the first quarter, you’ve driven 4,000 miles and spent $400 on tax-deductible business expenses. If you keep up the same amounts of each for the rest of the year, that’s 16,000 miles annually and $1,200 in tax-deductible business expenses.
In mileage deductions, that’s:
(4,000 mi) x (65.5 cents per mile)= $2,620
In business expenses, that’s $1,200 in deductions.
So then, subtract the total amount of deductions from your annual estimated salary:
$46,800 - $2,620 - $1,200 = $42,980
That’s your adjusted gross income that’s taxable.
Step 3. Now you calculate your estimated tax payment based on your income. This is where things get tricky, because taxes can be calculated differently based on what state you live in. It’s important to follow the steps outlined on Form 1040-ES. Based on the 2024 tax rate estimates, and following the steps on the form, your estimated taxes would be $9,270.
Step 4. Now just divide by 4 and you’ve got your quarterly tax payments. For this example, the driver should pay $2,317 in taxes this quarter.
As you can see, this can be a bit tricky. If you need help calculating your estimated taxes, just use our 1099 tax calculator to get an estimate of your annual tax bill.
Use the worksheet in Form 1040-ES to calculate and file your estimated tax payment based on the steps above. If you realize that you’ve estimated your earnings too high or too low, just fill out a new Form 1040-ES worksheet to recalculate your estimated tax payment for the next quarter. You want to estimate your earnings as accurately as possible to avoid any penalties.
If you’re expecting to pay quarterly taxes, bookmark these dates! Payments are due on April 15, 2024; June 17, 2024; September 16, 2024; and January 15, 2025
Payment period: January 1 – March 31
Tax payment is due April 15, 2024
Payment period: April 1 – May 31
Tax payment is due June 17, 2024
Payment period: June 1 – August 31
Tax payment is due September 16, 2024
Payment period: September 1 – December 31
Tax payment is due January 15, 2025
The four estimated tax payments are usually due each year on the 15th of April, June, September, and January. If that date falls on a weekend or federal holiday, the filing deadline is pushed to the following business day. If you don’t pay on time, then you may be subject to a penalty.
If you’re an independent contractor, you should receive a Form 1099 from each business client that has paid you at least $600 during the tax year. Also known as an “Information Returns Form,” it provides the IRS with a record of your income for the year.
If you’re a freelancer, you may have multiple 1099 forms from various employers, or you may not receive a 1099 form at all. Either way, it’s essential to take all of your self-employed income into account when calculating estimated payments.
Other IRS forms may be required depending on the type of business entity you’re filing under. For example, if you’re registered as a sole proprietor, LLC, S corp shareholder, or a self-employed individual, you must use Form 1040-ES to submit quarterly estimated tax payments.
If you're a freelancer, independent contractor, or self-employed individual, you're likely familiar with the process of paying quarterly taxes. As a 1099 worker, it's important to understand the steps involved in paying your quarterly taxes to avoid penalties and interest from the IRS.
The first step in paying your quarterly taxes as a 1099 worker is to estimate your income for the upcoming quarter. This can be done by reviewing your previous income and projecting your earnings for the next few months. It's important to be as accurate as possible to avoid underpayment penalties.
Consider using accounting software or working with a tax professional to help you estimate your quarterly income.
Once you have estimated your income, the next step is to calculate your quarterly tax liability. This can be done by using the IRS Form 1040-ES, which provides a worksheet to help you determine how much you owe in quarterly taxes.
Be sure to take into account any deductions, credits, and other factors that may impact your tax liability.
There are three primary ways to pay quarterly taxes:
Here’s a brief breakdown of how to pay your quarterly taxes via each of these three methods:
Many people choose to pay online because it is fast, easy, and secure. You can pay directly from your checking or savings account with no fees. With direct pay from a bank account, you can also schedule payments in advance. Alternatively, you can pay via a debit or credit card, but these involve fees (varies based on payment method and type).
You can pay your estimated tax payments by mail by sending a check or money order. The IRS has very specific rules and instructions for how to file and pay via mail, so make sure you check them carefully. In addition, there are different paying and filing addresses based on where you live. Find details on paying by mail on the IRS website.
If you prefer to pay your quarterly taxes over the phone, that’s an option as well. Simply call 1-800-555-3453 and follow the prompts in the automated phone system to pay over the phone. Keep in mind that you’ll need to have your taxpayer identification number and 4-digit PIN handy to use this system.
If you need to make a same-day IRS estimated tax payment, your best bet is to pay online, via bank account (Direct Pay) or debit card.
Alternatively, you can also contact your bank to see if they can do a same-day wire transfer to the IRS for you. Fees may apply if you use this method.
If you’re not sure the best way to pay quarterly taxes, visit the IRS’s guide to paying your taxes for instructions, or consult with your tax advisor.
Yes, quarterly taxes may also be referred to as estimated taxes, estimated quarterly taxes, or estimated tax payments. All of these terms refer to the same thing—paying taxes as you go as a self-employed individual.
Some self-employed workers don’t like paying quarterly, as it’s just another deadline to remember. We get it—one tax deadline a year is bad enough! Unfortunately, you can’t “prepay” your quarterly tax payments.
Paying quarterly taxes—if you owe them—is super important, as you could be subject to fines, underpayment penalties and interest on your tax bill from the IRS if you don’t pay when you should. Once a due date has passed, the IRS will add a small penalty (typically starts at 0.5% of whatever you owe.) However, this increases with each month you don’t pay.
This fine also includes interest of whatever you didn’t pay—and that interest rate can fluctuate from month to month. Long story short: just pay your quarterly taxes when they’re due!
You have to pay quarterly taxes IF:
AND
The underpayment penalty varies based on a variety of factors, including:
Generally, the underpayment penalty starts at 0.5% of the unpaid tax bill, and increases monthly for however long the amount remains unpaid. This is capped at 25%. Interest is also calculated (and owed) on any underpayment amounts, at a variable rate set by the IRS.
Tthe IRS interest rates for underpaid taxes are:
If you’re not sure how much you’ll owe in taxes from self-employed or 1099 income, use our simple tax calculator to estimate your annual income and tax bill. Once you’ve calculated your estimated tax bill for the year, simply divide by 4 to get your estimated quarterly payments.
If you have further questions or want more specific information for your situation, make sure to consult a tax professional.
Pro-tip: If you stay organized, you don’t have to get organized.
The best way to prepare for (and save money on!) quarterly taxes is to keep track of all your business mileage and expenses with well-kept records. Then, the more deductions you have, the lower your taxable income will be, and the less you’ll owe to the IRS. Need some help getting organized? Try Everlance: it’s the #1 app for tracking mileage and expenses, and we help the average 1099 worker save thousands of dollars a year on their taxes.
With Everlance as your mileage tracker for taxes, you can automatically capture your car mileage and business expenses—which likely add up to thousands of dollars of deductions. When preparing your taxes, just download your mileage and expense records from Everlance. Then, hand them over to your accountant or import them directly into your tax preparation software. Voila: money saved!
The IRS's Self-Employed Individuals Tax Center
Brad Thibeau is the Head of Growth & Partnerships at Everlance. Brad has worked at Everlance since 2021 with a focus on helping self employed people save time and money on their taxes.
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