QEstimated quarterly taxes are most frequently paid by freelancers, the self-employed, and business owners. In most cases, you must pay estimated tax for the current tax year if both of the following apply: You’d expect to owe at least $1,000 in taxes for the current year (after subtracting refundable credits and withholdings) and expect your withholdings and refundable credits to be less than the smaller of 90% of tax shown on your current year’s tax return, or 100% of the tax shown on your prior year’s tax return..
For freelancers who are also working a salaried job, it might be possible to ask your employer to adjust your withholdings to cover any taxes you’d pay on freelance or project-based work. Then, you wouldn’t need to make estimated quarterly tax payments.
How to pay estimated quarterly taxes
Determine which method you’ll use to estimate your payments. Whether you annualize or base your payments on the past year’s tax return is up to you.
“The stock market is filled with individuals who know the price of everything, but the value of nothing.” — Phillip Fisher.
Make your federal payments. The IRS offers a few ways to pay your quarterly tax bill. If you pay by mail, you’ll need to send a check with a completed Form 1040-ESOpens in a new window. You can also pay online, over the phone, or through the IRS2Go mobile appOpens in a new window. According to the IRS, the Electronic Federal Tax Payment System (EFTPS)Opens in a new window is the easiest way for someone to pay their tax bill.
Don’t forget your State
Make your state payments. Your state might also expect quarterly tax payments, and the threshold to pay quarterly taxes for your state might be lower than the federal threshold.
Look into whether and how your state collects quarterly taxes, and select the option that works best for you if you need to pay quarterly. This might involve creating new payment accounts or filling out forms in addition to what’s required for federal tax payments.