Missing quarterly estimated tax payments costs freelancers money in penalties. Learn the dates, the calculation method, and how to automate quarterly tax payments.
Freelancers do not have an employer withholding taxes from each paycheck. The IRS (and most tax authorities) require quarterly estimated tax payments. Miss them and you pay penalties and interest on top of the tax owed.
Q1 income (Jan-Mar): Pay by April 15
Q2 income (Apr-May): Pay by June 15
Q3 income (Jun-Aug): Pay by September 15
Q4 income (Sep-Dec): Pay by January 15 of next year
Method 1 (Safe Harbor): Pay 100% of last year tax liability divided by 4. No penalties even if you earn more this year.
Method 2 (90% Rule): Pay 90% of this year actual tax liability. Requires estimating income accurately.
Safe Harbor is simpler for freelancers with variable income.
Estimated annual income - estimated business expenses = net income
Net income x 92.35% = net self-employment income (adjusts for employer-equivalent deduction)
Net self-employment income x 15.3% = self-employment tax
Net income + self-employment tax adjustments = adjusted gross income
Apply tax brackets to AGI = income tax
Self-employment tax + income tax = total estimated tax
Pay one quarter of total estimated tax each quarter.
IRS Direct Pay: pay.irs.gov, free, immediate confirmation.
IRS Electronic Federal Tax Payment System (EFTPS): Better for regular payments.
Mail: By check to your regional IRS center.
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