What are Quarterly Estimated Payments?

When you work a W2 job, your employer generally withholds and pays taxes for you. If you are self-employed or earn any untaxed income, you are responsible for doing that on your own.

That’s what Estimated Quarterly Payments are! They are a way you can pay taxes throughout the year, so you don’t have to pay all at once when you file your tax return.

Where Do I Pay?

What Amount Should I Pay?

Since these are estimated tax payments, there are a few ways you can determine how much to pay. There’s no WRONG way to do it, and paying any amount will help reduce the burden when you file. Here are a few simple options: 


1. Pay a percentage of your profit

When you are self-employed, you only have to pay taxes on your profit (income minus expenses). If you earned $20,000, but had to pay $5,000 in expenses, you’re left with $15,000 in profit. The amount of tax you owe on that $15,000 will depend on your total household income (like if you also have a W2 job) and what state you live in.

FEDERAL/IRS RATE TO USE: 


 

 

 

 

STATE RATE TO USE:
A safe estimate for most states is 5%. (New York City residents should use 8%).

2. Pay based on last year

You can also make an estimated tax payment based on what you paid the previous year. If you look at your tax return, find the total amount of taxes you paid and divide that number by 4. If you pay that amount each quarter, you can avoid penalties and fees for late payment when you file.

  • Find your 2024 Form 1040 (your tax return)
  • Add line 26 “2024 estimated tax payments,” and line 37 
  • Divide by 4, and you now know the amount to pay quarterly

 

3. Schedule a one-time consultation 

If you’re completely lost and don’t know what to do, we can help during a one-time consultation. While we can’t set up payments on your behalf, we can generate an estimate for the IRS and your state, so you know exactly what to pay. You can see how to book a consultation here. 

 

What Are the Deadlines?

The dates for which estimated quarterly taxes are due are: 

  • Q1 Deadline is April 15
  • Q2 Deadline is June 15
  • Q3 Deadline is September 15
  • Q4 Deadline is January 15 of the following year

    * If the due date for making an estimated tax payment falls on a Saturday, Sunday, or legal holiday, the payment will be on time if you make it on the next day that's not a Saturday, Sunday, or legal holiday.

You can also check out our FAQ article on whether or not you should pay estimated taxes.