If you’re self-employed, a gig worker, or earning income as a 1099 contractor, tax season doesn’t just come once a year—it happens four times. Unlike traditional employees, you don’t have taxes withheld from your paycheck, which means the IRS expects you to pay estimated taxes every quarter.
Failing to do so could lead to penalties, interest, and a hefty tax bill in April.
This blog will guide you through everything you need to know to stay compliant and avoid year-end surprises.
💡 What Are Estimated Taxes?
Estimated taxes are periodic payments made to the IRS (and possibly your state) based on the income you earn that isn’t subject to withholding.
This includes:
- Freelance work
- Contract jobs (1099-NEC income)
- Side hustles (Uber, Etsy, consulting, etc.)
- Rental income
- Dividends and capital gains
When you’re self-employed, the IRS treats you as both the employer and the employee, which means you’re responsible for paying income tax and self-employment tax (Social Security + Medicare = 15.3%).
📆 When Are Estimated Taxes Due?
The IRS divides the year into four quarters:
| Payment Period | Estimated Tax Due |
|---|---|
| Jan 1 – Mar 31 | April 15 |
| Apr 1 – May 31 | June 15 |
| Jun 1 – Aug 31 | September 15 |
| Sep 1 – Dec 31 | January 15 (next year) |
⚠️ If the due date falls on a weekend or holiday, the deadline is extended to the next business day.
🧮 How to Calculate Your Estimated Taxes
There are two common methods:
1. Safe Harbor Method
To avoid penalties, pay at least:
- 90% of your current year’s tax, OR
- 100% of last year’s tax liability (110% if you made over $150,000)
This is ideal if your income fluctuates or you don’t want to estimate too closely.
2. Actual Income Method
Estimate your income and expenses quarterly and calculate:
- Federal income tax (based on your bracket)
- Self-employment tax (15.3%)
- State income tax (if applicable)
👉 Use IRS Form 1040-ES to calculate and pay your federal estimated tax.
🧾 How to Pay Estimated Taxes
Federal Payments
- Online: IRS Direct Pay
- By Mail: Using a payment voucher (Form 1040-ES)
- Through EFTPS: The Electronic Federal Tax Payment System
- With Tax Software: Most platforms allow online payments
State Payments
Each state has its own process and schedule. Be sure to check with your state’s Department of Revenue.
✅ What Records Should You Keep?
To stay organized and avoid mistakes, keep detailed records of:
- Invoices and payments received
- Business expenses and receipts
- Mileage logs
- Bank statements
- Copies of estimated tax payments made
Consider using bookkeeping tools like:
- QuickBooks Self-Employed
- Wave Accounting
- FreshBooks
- HoneyBook (for creatives and freelancers)
📉 What Happens If You Don’t Pay?
If you underpay or miss deadlines, the IRS may charge:
- Late payment penalties
- Interest on the amount owed
- A larger-than-expected bill at tax time
Even if you expect a refund or don’t have the cash flow, it’s better to pay something than nothing at all.
🧠 Pro Tips for Staying on Track
- Set aside 25–30% of your income for taxes in a separate savings account
- Use calendar reminders for quarterly deadlines
- Automate payments through IRS Direct Pay or EFTPS
- Work with a tax professional to review your estimates at least twice a year
- Don’t forget about your state—some states have their own quarterly tax rules
📅 Ready to Stay Ahead of Taxes?
At JTPS Advisory Co., we help freelancers and small business owners:
- Calculate accurate quarterly payments
- Track deductions to reduce what you owe
- Avoid IRS penalties and stress
- Stay ready for year-end filing