How To File Quarterly Taxes Without Stressing Out

If you're a freelancer, sole proprietor, independent contractor, or self-employed person, your taxes will look very different from an employee's. For one thing, you'll likely have to pay quarterly estimated taxes - and yes, your quarterly taxes vary by state!

If you're wondering how to file quarterly taxes, you've come to the right place. Paying them doesn't actually have to be stressful, and you can even get it done in about 15 minutes.

In fact, you can think of quarterly taxes as a plus: a way to pay your tax bill gradually over the year, instead of in one (painful) lump sum.

Why are quarterly estimated taxes required?

Our tax system is a “pay as you earn” system: taxes have to be paid as you receive income during the year. The government wants steady income, after all. That's why taxes are paid through withholding (for W-2 employees) and quarterly payments (for taxpayers with freelance income).

If you work for yourself, income taxes won't be withheld from your paychecks automatically. That's why the IRS uses quarterly tax payments instead to get what they're due.

You can think of estimated tax payments as a form of DIY withholding. When you first find out how much you're expected to owe in taxes (say, by using our 1099 tax calculator), you might feel taken aback. But if you make your payments every quarter, you won't feel overwhelmed in April.

There's one more major benefit to paying quarterly: you won't get hit with an underpayment penalty.

Who should pay quarterly taxes?

Most freelancers, independent contractors, and small businesses are required to pay quarterly estimated taxes. That's especially true if your self-employment income is your sole source of income.

However, there are some exemptions.

Who's exempt from paying quarterly taxes?

Even if you're self-employed, you won't have to pay quarterly if:

• You expect to owe less than $1,000 when you file your taxes, or

• You had no tax liability for the prior year

What does it mean to have no tax liability? Either your "total tax" was $0 on Form 1040, or you didn't have to file an income tax return at all. (This rarely happens, unless your income is very low.)

There are two more conditions you have to meet: You need to have been a US citizen, and your prior tax year needs to have been a taxable year of 12 months.

What if freelancing is just a side hustle and you have W-2 income?

If you have a traditional job and freelancing is a side hustle, you might be able to exempt yourself from paying quarterlies by asking your employer to withhold a little extra from your earnings. This is also true if your spouse has a W-2 job and you file jointly.

Revising your withholding ensures that the amount you end up owing is less than $1,000. That way, you won't be penalized for underpayment.

To ask for extra withholding, you'll need to fill out a new W-4 form. In the row labeled “Other Income,” enter your expected net earnings from freelance or contractor work. You can also use the IRS’s Tax Withholding Estimator tool to help you fill out the form.

How much should I pay in quarterly taxes?

This is where Keeper has your back with our free quarterly tax calculator. Just enter in your state, your expected monthly income from self-employment, and your spouse’s details.

From there, our tool will tell you when the next payment is due, and how much you’ll owe to both the IRS and to your state.

To see a breakdown of how quarterly taxes work in your state, see our state-by-state quarterly tax guide.

Estimating your income

Estimating your self-employment income can be hard. After all, if you're a freelancer, your taxable income can vary from year to year. But that's no cause for concern. You're not expected to get it exactly right. That's why they're called estimated tax payments!

The IRS even gives quarterly filers a 10% buffer in case they're slightly off. Just remember, it's safer to slightly overestimate than to underestimate. If you overpay on your quarterly tax payments, you'll get that extra money back as a tax refund.

If you have income that fluctuates wildly from month to month, you can even account for that using what's called the annualized income installment method. This method allows people with variable income to make quarterly tax payments that vary in size, depending on how much they're earning at different times of the year. To learn about how it works, read our article on the annualized income installment method.

When should I pay quarterly taxes?

Quarterly taxes are typically due:

• April 15

• June 15

• September 15

• January 15 of the next year

Note that three of the year's payments happen in the same calendar year, while the final payment is due in January of the following year.

How much is the penalty for not paying quarterly taxes?

It’s important to pay by the deadlines. Otherwise, you might be on the hook for penalties.

Quarterly tax penalties include both a cumulative monthly percentage and a monthly interest rate. The interest rate is about 6–7% annually, set by the IRS each quarter and is applied to whatever you underpaid, for as long as it's unpaid.

There's one important detail to note: Every month you delay paying adds to the penalty. That means you should pay as soon as possible.

If you missed the estimated tax payment deadline in April, for example, you should double your payment in June to avoid six months of penalties.

Think you'll owe penalties? Estimate how much they'll be with Keeper's estimated tax penalty calculator.

How to pay quarterly taxes

If you've determined that you're on the hook for quarterly taxes this year, you have a couple of ways to pay your federal quarterly taxes.

1. Paying electronically

One option for handling your quarterly taxes: e-file using IRS Direct Pay. This web portal lets you make a tax payment directly from your checking account. There's no need to submit any paperwork or tax forms alongside your payment, and you don't have to register to use it. As a result, this option is fast. You can generally get it done in about 15 minutes.

You've got another option for electronic payment: the Electronic Federal Tax Payment System (EFTPS), which does require a fairly lengthy registration process. The IRS will send you some account information via snail mail, so it can take around a week.

If you’re lucky enough to live in a state with no income tax, congratulations! You’re done. Otherwise, though, you’ll have to pay your state as well. State payment portals are all different, but they tend to look very similar to EFTPS. In most cases, you’ll create an account online, confirm your identity, and make the payment.

If you file your taxes with Keeper, we'll help you figure out your quarterly payments.

2. Paying with a check

You can also pay your quarterly taxes with a check or money order. You'll need to fill out a payment voucher and mail it, alongside your check to the US Treasury Department.

The address you'll send it to varies depending on where you live.

You can find the voucher and mailing instructions on Form 1040-ES. Keep in mind, Form 1040-ES is a worksheet for calculating your quarterly estimated taxes. (CPAs and tax preparers, for example, sometimes use it to determine how much their clients owe.) That’s the only use for the form – you don’t have to file it with your quarterly tax payments.

If you’re a bit old-fashioned and prefer to make your state payments by check, you’ll always have that option, as well.

How do I keep track of my quarterly tax payments?

After you’ve made your payment, make sure to keep records indicating the date and amount that you paid. You’ll need this information to file your taxes.

If you forgot to record how much you’ve already paid, don't worry! You can verify this information by requesting a transcript from the IRS.

Once you've jotted down your payment information, you can officially stop stressing out about your quarterly taxes. Think of it this way: You may have just saved yourself thousands in penalties, and that's something worth celebrating.