Quarterly Taxes: A Beginner’s Guide

Most Americans only have one tax deadline to worry about. But for the growing number of self-employed workers out there, tax time comes once every three months. Quarterly taxes are the only way for the self-employed crowd to avoid a nightmarish tax debt every year—including penalties from the government for not paying quarterly estimates.

In this article, we’ll look at who should pay quarterly taxes, how to estimate what you owe, when they’re due, and how to pay them.

Who Needs to Pay Quarterly Taxes

Simply put, if you expect to owe at least $1,000, and if your employer isn’t withholding taxes for you, you should pay quarterly estimates. That means sole-proprietors, freelancers, “gig-economy” grinders, successful Etsy crafters, and anyone else operating outside the boundaries of a traditional “full-time employment” structure should look into paying quarterly instead of annually.

As always, there are some exceptions to this rule, but those are few and far between. If you’re one of the millions of Americans who match the basic description of owing at least $1,000 on your annual return, and you don’t work for a company that withholds taxes automatically, you should start planning to pay quarterly.

There could even be tax penalties assessed for not paying quarterly, so be sure to speak with an accountant and come up with a plan.

Estimating Quarterly Taxes

The most basic way to estimate quarterly payments is to take what you owed on last year’s return, and divide it by four. That’ll at least get you paying something. If you’re earning the same amount as last year, and there haven’t been any major changes to the tax code, you’ll probably be pretty close. But is it the exact right amount?

Probably not.

With a little extra effort, you can use this tax form to calculate exactly what you should pay each quarter. This is the best way to protect yourself against any unpleasant surprises at the end of the tax year. And, of course, your accountant would be happy to help.

When to Pay Estimated Taxes

Obviously your quarterly taxes are due four times throughout the year, but when exactly should you pay them?

Estimated quarterly payments are generally due by the 15th of April, June, September, and January. If you’re paying quarterly, be sure to have your payments in by those deadlines.

The truth is, you could pay estimated taxes every week if you thought it made your life easier, and the Electronic Federal Tax Payment System lets you do that. If you run a business, or are already in the habit of updating books on a weekly basis, that might be a good route to take. Bi-weekly or monthly payments are also acceptable. The key is to make sure you’ve paid the proper amount by each quarterly deadline.

You’ll also need to look into your state’s policies around estimated payments, as these vary from state to state. In New York, estimated tax policies closely match the federal guidelines.

How to Pay Quarterly Taxes

Once you’ve figured out what you owe, it’s easy to get your federal quarterly tax payments where they need to go. The Electronic Federal Tax Payment System makes it easy to pay your federal tax estimates online. You can also mail a check, or even pay over the phone. Just be sure to get them in by the deadlines outlined above!

Again, state payment policies vary from state to state, but New York state offers online payment.

However you choose to pay your estimated taxes, it’s important to keep detailed records of what you pay and when.

If you were one of the millions of people caught off-guard by an exceptionally large amount owed on last year’s taxes, it’s time to start estimating and paying throughout the year. You won’t cut down on the amount owed, but you’ll certainly help take away some of the sting of paying in