“As a freelancer, single business owner, or independent worker, taxes can get a bit tricky,” the SBA (Small Business Administration) explains. “Instead of waiting for the traditional tax season during the months of March and April, it's in your best interest to pay the government in periodic payments. Since you do not have an employer who manages your taxes, Social Security and other benefits, per a W4 form, you will need to manage your books and determine how much you owe the government based on your business earnings.”
Who has to pay estimated taxes?
According to the IRS, individuals—including sole proprietors, partners, and S corporation shareholders—usually need to make estimated tax payments if they expect to owe $1,000 or more in taxes when their return is filed. Generally, corporations need to make estimated tax payments if they expect to owe $500 or more when their return is filed.
That said, if you receive salary and wages, you can file a Form W-4 to withhold tax from your earnings, thereby avoiding tax payments for that job’s income. The IRS also provides a Tax Withholding Estimator to calculate the amount of tax to be withheld. Income that's not subject to withholding includes earnings from self-employment, interest, dividends, rent, and alimony, according to the Form 1040-ES help page.
How do I pay these quarterly taxes online?
Alternatively, you can pay the IRS through the Electronic Federal Tax Payment System (EFTPS), “provided free by the U.S. Department of the Treasury through which you can “pay any tax due to the Internal Revenue Service using this system,” according to its website. For estimated taxes to your state, check your state’s revenue department website.
When are estimated tax payments due?
For estimated tax payments, there are four payment periods, each with its own due date. The IRS says that for taxpayers who mail their estimated tax payment, the postmark date has to be on or before the due date. For IRS Direct Pay, the deadline is 8 p.m. ET on the due date. And for credit or debit card payment, the deadline is midnight on the due date.
The payment periods and due dates are:
- Jan. 1–Mar. 31: April 15.
- Apr. 1–May 31: June 15.
- Jun. 1–Aug. 31: Sept. 15.
- Sep. 1–Dec. 31: Dec. 31.
According to Publication 505, there’s only one due date for 2021 estimated tax if at least two-thirds of your gross income for 2020 or 2021 comes from fishing or farming: Jan. 18, 2022. For more information about estimated tax, consult Publication 505 on the IRS website.