When you're an employee, taxes are automatically withheld from your paycheck. But freelancers, contractors, and side hustlers? You're responsible for paying taxes yourself—four times a year.
Why Quarterly Payments?
The U.S. tax system is "pay as you go." The IRS wants money throughout the year, not just at tax time.
Who must pay quarterly:
- Freelancers and independent contractors
- Self-employed individuals
- Gig workers (Uber, DoorDash, Etsy, etc.)
- Anyone with significant investment income
- Side hustlers with profitable businesses
Pro Tip
If you expect to owe $1,000+ in taxes for the year (beyond ), you likely need to make quarterly payments.
The Four Due Dates
| Quarter | Income Period | Due Date |
|---|---|---|
| Q1 | Jan 1 - Mar 31 | April 15 |
| Q2 | Apr 1 - May 31 | June 15 |
| Q3 | Jun 1 - Aug 31 | September 15 |
| Q4 | Sep 1 - Dec 31 | January 15 (next year) |
Watch Out
Notice Q2 covers only 2 months, and Q3 covers 3 months. The dates are quirky, so mark your calendar.
What Taxes You're Paying
Self-employment income faces multiple taxes:
Self-Employment Tax (15.3%)
- 12.4% Social Security (on first $168,600 in 2024)
- 2.9% Medicare
- This replaces what employers normally pay
Federal Income Tax
- Based on your
- Typically 12-24% for most self-employed
State Income Tax
- Varies by state (0-13%+)
Aisha started freelance graphic design and earned $40,000 her first year. She was shocked to owe $8,000+ at tax time: $5,652 in self-employment tax plus federal and state income taxes. The next year, she paid quarterly and avoided the painful lump sum.
How to Calculate Your Payments
Method 1: Safe Harbor (Easiest)
Pay 100% of last year's total tax liability, divided by 4. Even if you owe more, no penalties.
Example:
- Last year's total tax: $8,000
- Quarterly payment: $2,000
For high earners ($150,000+ AGI), the safe harbor is 110% of last year's tax.
Method 2: Current Year Estimate
Estimate this year's income and pay 90% of projected tax, divided by 4.
Example:
- Expected self-employment income: $50,000
- Estimated total tax: $10,000
- Quarterly payment: $2,500
Method 3: Actual Income Method
Calculate tax on actual income each quarter. More accurate but more work.
Do This
Use the IRS Form 1040-ES worksheet or tax software to calculate your quarterly amount. Update estimates if income changes significantly.
The Self-Employment Tax Calculation
Self-employment tax is calculated on net self-employment income:
- Calculate net profit: Revenue minus business expenses
- Multiply by 92.35%: Only this portion is subject to SE tax
- Apply 15.3%: Calculate SE tax
- Divide by 4: Quarterly SE tax amount
Example:
| Step | Calculation |
|---|---|
| Quarterly net profit | $10,000 |
| × 92.35% | $9,235 |
| × 15.3% SE tax | $1,413 |
| + Federal income tax (~22%) | $2,200 |
| = Quarterly payment | ~$3,613 |
How to Make Payments
Option 1: IRS Direct Pay (Free)
- Go to irs.gov/payments
- Select "Estimated Tax"
- Pay from bank account
- Get confirmation number
Option 2: EFTPS (Free)
- Electronic Federal Tax Payment System
- Requires enrollment at eftps.gov
- Good for scheduled payments
Option 3: IRS2Go App
- Mobile app for payments
- Convenient for on-the-go
Option 4: Credit/Debit Card
- Third-party processors
- 1.87-1.99% fee for credit cards
- Not usually worth it unless earning rewards
Quick Win
Set up automatic quarterly payments through EFTPS. Schedule them a few days before due dates so you never miss one.
State Estimated Taxes
Most states with income tax also require quarterly payments:
- Due dates often match federal
- Separate payment system per state
- Calculate based on state tax rate
What Happens If You Don't Pay
The IRS charges an underpayment penalty:
- Currently around 8% annual rate
- Calculated daily on each missed quarter
- Even one missed payment triggers penalties
Example: Miss $3,000 Q1 payment → ~$180 penalty by year end
The penalty isn't huge, but it adds up—and it's completely avoidable.
Special Situations
Side Hustle + Day Job
If you have W-2 income, you have options:
- Increase W-2 withholding to cover side hustle tax
- Make quarterly payments on side income only
- Combination of both
Do This
Adjust your W-4 at your day job to withhold extra. It's easier than quarterly payments if your side income is modest.
Variable Income
If income fluctuates wildly:
- Use annualized income installment method
- Pay more in high-earning quarters
- Requires Form 2210 at tax time
First Year Self-Employed
No prior year to base safe harbor on. Estimate conservatively and adjust as you go.
Common Mistakes
Avoid This
- Forgetting state payments - Penalties apply there too
- Underestimating income - Be conservative in estimates
- Not tracking expenses - Reduces taxable income
- Waiting until Q4 - Pay as you earn, not at year end
- Ignoring payment confirmations - Save proof of payment
Setting Money Aside
For every dollar of self-employment income, set aside:
- 25-30% for self-employment tax + federal income tax
- Additional 5-10% if your state has income tax
Pro Tip
Open a separate savings account for taxes. Transfer your tax percentage immediately when you receive payment. Treat it as money that isn't yours.
Tracking for Tax Time
Keep records of:
- All quarterly payments made (dates and amounts)
- Confirmation numbers
- Business income and expenses
- Mileage logs if applicable
Your tax preparer (or software) will need this information to file accurately and claim credit for payments made.