HOW TO PAY ESTIMATED QUARTERLY TAXES

Congratulations! You’ve achieved your dream of becoming your own boss. Or maybe your side hustle has taken off and you’re starting to generate some serious income. But if you’re new to self-employment, you may find that with more freedom comes more responsibility – particularly when it comes to taxes.

Understanding Quarterly Taxes

What Are Quarterly Taxes?

When you work for an employer, federal and state taxes are automatically taken out of your paycheck. When you’re self-employed – as a sole proprietor, a partner, a freelancer or a gig worker – you’ll need to pay estimated taxes to the IRS each quarter if you expect to owe at least $1,000 when your return is filed.

Your estimated quarterly payments cover not just income tax but also a 15.3% self-employment tax, which include Social Security and Medicare taxes normally withheld by employers.

Importance of Making Quarterly Tax Payments

Making quarterly tax payments has a few key benefits. The most important one is avoiding penalties for underpayment that may be imposed by the IRS. Beyond staying in the IRS’s good graces, paying quarterly taxes helps you manage your cash flow, so you can plan and save more effectively throughout the year. It also helps you avoid surprises – by spreading out your tax burden, you may avoid being hit with a large tax bill in April.

Estimated taxes are generally due:

• April 15 if you earned income from January 1 to March 31
• June 15 if you earned income from April 1 to May 31
• September 15 if you earned income from June 1 to August 31
• January 15 of the following year if you earned income from September 1 to December 31

What if the due date falls on a Saturday, Sunday, or legal holiday? Don’t worry. The payment will still be on time if you make it on the next day that's not a Saturday, Sunday, or legal holiday.

Preparing to Pay Quarterly Taxes

Gathering Necessary Documents

As you prepare to pay your quarterly taxes, start by gathering the documents you’ll need. These include:

• Income statements, including any 1099 forms or other records of income received like invoices or payment records
• Expense receipts for travel, office supplies, equipment or other deductible costs
• Bank statements to verify income deposits and business expenses
• The previous year’s tax return, which can provide a good reference for estimating taxes and calculating deductions
• Form 1040-ES to figure out and pay your estimated tax

Keeping these documents well-organized and accessible will make your life easier when it’s time to make your payments. Create digital folders for income and expense records each month or quarter. You can scan or photograph any paper documents and add them to these files. And set reminders on your phone or calendar to keep track of due dates for quarterly filing.

Calculating Estimated Taxes

There are a couple of methods to figure out your quarterly payments. You can estimate your tax bill for the year, using your prior year’s tax return as a guide, and then simply make four equal payments. This method may be preferable if your income and taxes are fairly stable from year to year.

You can also choose to make payments based on your actual income each period. Doing it that way may require a little more work, and your payments will probably be unequal.

Form 1040-ES has a worksheet to help you with the calculation, but here’s a simple example of the steps you can take to estimate your payments, using the “four equal payments” approach:

• Estimate your total self-employment income for the year, using last year’s tax return as a baseline if you were self-employed then.
• Subtract any deductions, either the standard deduction of $15,000 for tax year 2025 or itemized expenses, to give you your taxable income.
• Estimate your income tax by applying the IRS tax brackets. Assuming 2025 rates for single filers on a taxable income of $80,000, that would be 10% on the first $11,925, 12% on income over $11,925 and 22% on income over $48,475.
• Calculate your self-employment tax by applying 15.3% to the taxable income you figured out earlier – remember, this covers Social Security and Medicare.
• Determine your total tax by adding your income tax and self-employment tax
• Divide the total tax by four and that’s your quarterly payment.

Paying Quarterly Taxes

How to pay

When it’s time to submit your payments, you’ve got several options to choose from. You can pay:

• By mail
• By phone
• Online through the Electronic Federal Tax Payment System (EFTPS) or IRS Direct Pay
• From your mobile device using the IRS2Go app
• Through an account at IRS.gov, where you can see your payment history and other tax records

Payment Options

The simplest way is to pay right from your bank account when you use the Electronic Federal Tax Payment System or IRS Direct Pay. You can also pay directly from your IRS account. Paying with a debit card, credit card or digital wallet is an option, but processing fees apply.

Other payment methods that are available – but perhaps less direct and convenient – include same day wire, check or money order through U.S. mail and cash through a prepaid card or an IRS retail partner.

Common Mistakes to Avoid

Missing Deadlines

The IRS expects you, as a freelancer or self-employed business owner, to pay taxes throughout the year rather than just once at tax time. Missing the quarterly deadlines (see above) can result in underpayment penalties and interest charges on the amount due – even if you file your taxes later. That’s not all. Missing payments can also impact your Social Security benefits, because the self-employment tax you owe each quarter counts toward your total benefits.

Incorrect Calculations

Common errors when estimating taxes include underestimating income, overlooking deductions and miscalculating self-employment tax. You can help avoid these mistakes by tracking your income and expenses carefully throughout the year, keeping detailed records and utilizing resources like the worksheet in Form 1040-ES. Online calculators can also help ensure accuracy.  

Tips for Simplifying the Process

Using Tax Software

To help streamline the process – and eliminate some of the stress – of estimating quarterly payments, consider using commercially available tax software. While features will vary, these platforms are generally designed to make tracking income, expenses and deductions simpler, so you can have more confidence in your tax calculations.

Seeking Professional Guidance

Sometimes, there’s no substitute for an experienced, qualified professional. If your business or tax situation is particularly complex, consulting with a tax professional can help you save time, minimize errors, take advantage of tax-saving opportunities and potentially reduce your tax liability.

How to find a reputable tax professional:

1. Check qualifications: Look for certified professionals like a CPA (Certified Public Accountant) or EA (Enrolled Agent). These credentials ensure they have specialized knowledge.
2. Seek referrals: Ask fellow freelancers or business owners for recommendations.
3. Verify experience: Ensure the advisor has experience with self-employed tax issues and quarterly filings.
4. Research reviews: Look up reviews and ratings on trusted websites like the Better Business Bureau.