Quarterly Estimated Taxes: A Plain-English Guide for the Self-Employed

If you're self-employed, a freelancer, or a small business owner, no employer is withholding taxes from your income. That's where quarterly estimated taxes come in.

Who needs to pay estimated taxes?

Generally, you may need to make estimated payments if you expect to owe $1,000 or more in federal tax for the year after subtracting withholding and credits. This commonly applies to sole proprietors, partners, S corporation shareholders, and anyone with significant income not subject to withholding.

When are payments due?

Federal estimated tax payments are typically due four times a year:

• April 15 for income earned January through March
• June 15 for income earned April and May
• September 15 for income earned June through August
• January 15 of the following year for income earned September through December

When a due date falls on a weekend or holiday, it moves to the next business day.

How much should you pay?

Your payments should cover both income tax and self-employment tax. Many people use the "safe harbor" approach, paying at least 100% of the prior year's total tax (110% for higher-income taxpayers) or 90% of the current year's tax, to avoid underpayment penalties.

Tips to stay on track

• Set money aside with every payment you receive. A separate savings account for taxes keeps you from spending it.
• Keep your books current. Accurate monthly bookkeeping makes estimating your income far easier.
• Revisit your estimates mid-year. If your income rises or falls significantly, adjust your remaining payments.
• Don't forget state taxes. Many states have their own estimated payment requirements.

Get help with your estimates

Estimated taxes are much simpler with a plan. Contact Naulty & Co. and we'll help you calculate payments and stay ahead of every deadline.

This article is for general information only and is not tax advice for your specific situation.