How to pay quarterly taxes as an independent contractor

Q: What happens if you dont pay quarterly estimated taxes?

If you dont pay enough tax through withholding and estimated tax payments, you may be charged a penalty. You also may be charged a penalty if your estimated tax payments are late, even if you are due a refund when you file your tax return.

Quarterly Estimated Payments Due Dates

If you expect to owe more than $1,000 in taxes (that’s earning roughly $5,000 in self-employment income), then you are required to pay estimated taxes.

People who work for an employer have a portion of their taxes taken out of each paycheck. Self-employed workers don’t, so you’ll need to pay your own taxes. Most self-employed workers pay quarterly estimated taxes. You can use this simple tool to calculate your estimated taxes.

If you expect to owe more than $1,000 in taxes (that’s earning roughly $5,000 in self-employment income), then you are required to pay estimated taxes. If you don’t make estimated tax payments, you may be charged fees by the IRS.

Estimated payments are due four times a year on the following dates:

Income from:	Quarterly Estimated Taxes Due:
January 1 to March 31	April 15
April 1 to May 31	June 15
June 1 to August 31	September 15
September 1 to December 31	January 15 of the following year

You are required to pay 100 percent of the total of your prior year’s taxes or 90 percent of your estimated current year’s taxes. If you make over $150,000 in self-employment income, you must pay 110 percent of last year’s taxes.

If you didn’t owe taxes last year, you aren’t required to make estimated tax payments. However, it is a good idea to pay estimated taxes so you don’t have a large bill at tax time that you are unprepared to pay.

If this is your first time earning self-employment income, you can estimate your yearly income based on your weekly earnings. Use this simple tool to calculate your estimated payment.

How to Pay

There are several easy ways to make your payments.

1. Electronic

If you’re comfortable online, one option is to use the Electronic Federal Tax Payment System (EFTPS). You’ll have to enroll on their website. Just make sure to do this before a payment is due, as you won’t be able to make any payments the day you register.

Another electronic option is Direct Pay on the IRS website. Direct Pay does not require registration and, like EFTPS, makes payments directly from your bank account. There are no fees associated with direct bank transfers.

To make payments by debit or credit card, choose one of the IRS approved payment processors and note the varying processing fees.

If you e-file your taxes, you can make and schedule payments from your bank account at tax time with Electronic Funds Withdrawal.

2. Phone

You can choose one of the IRS-recognized service providers to make payments by phone with a credit or debit card. Ask about the processing fees before sharing your card information so you aren’t surprised.

Alternatively, once enrolled with EFTPS, you can make payments by phone.

3. Mail

If you prefer making a physical payment, you can mail a check or money order for your estimated payments. Once you’ve calculated the amount you must pay, fill out the payment voucher on Form 1040ES. This is the least secure payment method. Carefully consider other options available to you before mailing a payment.

Preparing for payments

Remembering to pay your estimated payments can be tricky. Set your own calendar reminders, phone alarms, or whatever it takes to remember these important deadlines.

It can also be hard to put money aside for quarterly estimated payments. One option is to establish automatic monthly or biweekly bank transfers to a designated account so that you don’t have access to any money you set aside for your taxes. You can also treat these payments like a bill and send a portion to the IRS each month when you pay other bills.

If it’s tax time and you can’t afford to pay your taxes, file your taxes anyway, as not filing can lead to penalty fees.

All information on this site is provided for educational purposes only and does not constitute legal or tax advice. The Center on Budget & Policy Priorities and the CASH Campaign of Maryland are not liable for how you use this information. Please seek a tax professional for personal tax advice.

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In the U.S., income taxes are collected on an ongoing basis. For many of us, this means that an employer pays federal and state taxes on our behalf by withholding a certain amount from each paycheck.

If you earn income as a freelancer, or if you receive certain types of non-wage income, you may need to pay what the IRS calls "estimated quarterly taxes." Here's what those are and how they work.

What are estimated tax payments?

Estimated tax payments are taxes paid to the IRS throughout the year on earnings that are not subject to federal tax withholding. This can include self-employment or freelancer earnings, or income you've earned on the side such as dividends, realized capital gains, prizes and other non-wage earnings.

You may also be liable for making estimated tax payments if you are an employee but the withholding on your earnings doesn’t fully cover your tax liability, meaning what you expect to owe for the tax year. The amount of money withheld on your paycheck depends on the information you provided to your employer on your W-4.

When estimated quarterly taxes are due

Estimated tax payments should be made as your income is earned, and the IRS sets deadlines for collection on a quarterly basis. For 2022, here's when estimated quarterly tax payments are due:

If you earned income during this period

Estimated tax payment deadline

Jan. 1 – Mar. 31, 2022.

April 18, 2022.

April 1 – May 31, 2022.

June 15, 2022.

June 1 – Aug. 31, 2022.

Sept. 15, 2022.

Sept. 1 – Dec. 31, 2022.

Jan. 17, 2023.

These dates don’t coincide with regular calendar quarters, so plan ahead. You can also make payments more often if you like, says Bess Kane, a CPA in San Mateo, California.

“I think it's easier to make 12 smaller payments than four larger payments," says Kane. "If you owe $1,200 for the year, I would rather pay $100 a month than $300 four times a year. And if we're talking bigger numbers, it gets pretty extreme.”

🤓Nerdy Tip

You don’t have to make the payment due in mid-January if you file your tax return and pay what you owe by January 31.

Who should make estimated quarterly tax payments?

People who aren't having enough withheld

The IRS says you need to pay estimated quarterly taxes if you expect:

You'll owe at least $1,000 in federal income taxes this year, even after accounting for your withholding and refundable credits (such as the earned income tax credit), and
Your withholding and refundable credits will cover less than 90% of your tax liability for this year or 100% of your liability last year, whichever is smaller. The threshold is 110% if your adjusted gross income last year was more than $150,000, or $75,000 for married filing separately.

The self-employed

Independent contractors, freelancers and people with side gigs who expect to owe more than $1,000 in taxes are prime candidates for estimated quarterly taxes, says Kane. That’s because there’s no tax automatically withheld on their income, she explains.

Businesses

Corporations may also need to make estimated income tax payments if they'll owe at least $500 for the tax year.

Landlords and investors (maybe)

People with rental income and investments might need to pay estimated quarterly taxes— even if their employers withhold taxes from their paychecks. “Those might not always be calculated into their withholding amount, and then they come up short and end up having to pay an estimated tax penalty and don't even know what estimated taxes are,” says Thomas Mangold, a CPA in Austin, Texas.

How to calculate quarterly estimated taxes

There's more than one way.

Method 1

You can estimate the amount you’ll owe for the year, then send one-fourth of that to the IRS. For instance, if you think you’ll owe $10,000 for 2022 you'd send $2,500 each quarter. This may work best for people whose income is pretty much the same throughout the year, or for people who have a good idea of what their income is going to be.

Method 2

Another method is to estimate your annual tax liability based on what you’ve already earned during the year. This is often better for people whose income varies. Essentially, you annualize your tax at the end of each quarter based on a reasonable estimate of your income and deductions so far this year. The IRS has a worksheet to help you do the math.

Either way, you'll use IRS Form 1040-ES to show your income estimate and project your tax liability. IRS Publication 505 has all the rules and details, and good tax software will help you fill out the form and do the math.

If it turns out that you overestimated or underestimated your earnings, you can complete another Form 1040-ES and refigure your estimated tax for the next quarter. When you file your annual return, you’ll likely need to attach an extra form — IRS Form 2210 — to explain why you didn’t send equal payments. If you paid too much, you can get a refund or apply the overage as a credit to future payments.

The calculations can get complicated quickly, so it’s a good idea to consult with a qualified tax preparer if you have questions. Plus, there are special rules for farmers, fishermen and certain household employers.

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How to pay estimated quarterly taxes

There are several ways you can get your estimated tax payments to the IRS, including:

Your online IRS account.
The IRS2Go app.
IRS Direct Pay.
The U.S. Treasury’s Electronic Federal Tax Payment System.
By debit or credit (additional fees apply).
Pay in cash at certain IRS retail partners.

You can also mail your estimated tax payments with IRS Form 1040-ES using a payment voucher, but the IRS highly encourages taxpayers to consider electronic methods of payment.

» MORE: Even more ways you can make an IRS payment

Frequently asked questions

Do you have to pay estimated taxes quarterly?

According to the IRS, you don’t have to make estimated tax payments if you’re a U.S. citizen or resident alien and you had no tax liability for the previous full tax year. And you probably don’t have to pay estimated taxes unless you have untaxed income.

Can you pay estimated taxes anytime?

Estimated taxes are due as income is earned, and the IRS sets quarterly deadlines for their collection. You can opt to send four payments per year following the IRS schedule, pay in smaller increments more frequently or cover your estimated yearly liability in your first quarterly payment — just make sure you’re covering your tax liability for each quarter to avoid penalties.

What happens if I forget to pay?

The IRS will charge penalties if you didn’t pay enough tax throughout the year. The IRS can charge you a penalty for late or inadequate payments even if you're due a refund when you file your tax return.

You were a victim of a casualty, disaster or other unusual circumstance, or
You’re at least 62, retired or became disabled this year or last year, and your underpayment was due to “reasonable cause” rather than “willful neglect”

How can I make this easier?

“If you're married and your spouse has a regular job and is having taxes withheld, he or she may have enough taxes withheld to cover the two of you,” Kane explains.

You can accomplish this by giving his or her employer a new Form W-4, instructing how much tax to withhold from each paycheck. You can change your W-4 any time. If you’re getting a pension or annuity, use Form W-4P.

How do I start paying quarterly taxes?

You can submit them online through the Electronic Federal Tax Payment System. You can also pay using paper forms supplied by the IRS. When you file your annual tax return, you'll pay the balance of taxes that weren't covered by your quarterly payments.

Do independent contractors file quarterly?

Must I file quarterly forms to report income as an independent contractor? You may need to make quarterly estimated tax payments. For information on estimated tax payments, refer to Form 1040-ES, Estimated Tax for Individuals. Note: You may also have state and local requirements for estimated tax payments.

How do I calculate self

To calculate your estimated taxes, you will add up your total tax liability for the current year—including self-employment tax, individual income tax, and any other taxes—and divide that number by four.

What happens if you don't pay quarterly estimated taxes?

If you don't pay enough tax through withholding and estimated tax payments, you may be charged a penalty. You also may be charged a penalty if your estimated tax payments are late, even if you are due a refund when you file your tax return.