What Are Quarterly Taxes and How Do You Pay Them?
Most people dread Tax Day in April. But if you’re self-employed, that’s not the only deadline to know. You’ll likely also have to pay quarterly taxes four times a year. But what are quarterly tax payments, exactly?
Multiple tax deadlines may sound intimidating, but they don’t have to be. Our ultimate guide for 1099 quarterly taxes can help. Here, learn what quarterly payments are, whether or not you need to file them, and how to pay quarterly taxes for 1099 workers.
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What are quarterly payments? And when are they due?
Everyone has to pay taxes. If you work a traditional full-time job (meaning you’re a W2 worker), your employer takes taxes from your paycheck without any action on your part.
If you’re self-employed (meaning you’re a 1099 worker like an Uber driver, freelancer, or real estate agent), you’re typically responsible for paying taxes on your own. That’s because taxes are not automatically withheld from your pay.
Here’s how quarterly taxes work: They’re what you make to the IRS throughout the year (instead of all at once on Tax Day in April). In other words, you have to pay your 1099 taxes in chunks four times a year rather than as one big payment.
These quarterly tax payments are based on your estimated income for the current year. Most people use their previous year’s taxes as a guide.
But not every 1099 worker has to pay this self-employment tax quarterly (more on that in a moment).
Do I have to pay quarterly taxes?
If you’re self-employed and turning a profit, you probably have to pay 1099 taxes quarterly. If you have more expenses than income, however, you likely don’t. That’s because you won’t owe any taxes on your 1099 income at all.
Alternatively, you might not owe anything if you’re already paying enough in taxes during the year to cover your quarterly 1099 tax payment. This may be the case if you have a W2 full-time or part-time job where your taxes are withheld for you and you typically get a tax refund. This is common for people who have both a W2 job and 1099 income.
You also don’t need to file quarterly if you’ve already paid at least:
90 percent of your estimated tax owed for the current year
or
100 percent of the tax amount owed shown on your return for the prior year
In this case, your tax liability is already almost fully covered. Keep in mind, this situation is most common for people who got a refund for the previous year’s tax and use that to pay the upcoming year’s taxes.
For example, if you got a refund on your 2023 taxes and put it toward your 2024 taxes, you may be covered for estimated taxes. (But only if that refund equals 90 percent or more of your expected 2024 taxes or was equal to 100 percent of your 2023 taxes owed).
What if I didn't earn that much?
Even if you only earned a little, you may still need to pay quarterly taxes. If you expect to owe $1,000 or more in taxes for the year (after deductions and credits), the IRS expects you to make quarterly tax payments on your business profit for that tax year.
As a reminder, you’re making a profit if your self-employment income is higher than your business deductions.
Put simply: You should consider paying quarterly taxes if you have income that didn't have taxes withheld and you expect to owe $1,000 or more in taxes on your combined income for the year.
How to pay quarterly taxes for 1099 workers (and payment methods)
You’ll need to file the quarterly tax form for self-employed workers: Form 1040-ES. You can file this form by hand. Or you can use tax filing software like TurboTax to help you calculate what you owe and file online.
So, what’s the difference between 1040-ES and 1040 forms? Form 1040-ES reports estimated tax for this year. Form 1040 reports your actual income from the previous year.
Here’s how to pay:
Step 1: Calculate what you owe.
Form 1040-ES will ask you to use your expected adjusted gross income (AGI) to estimate your owed tax. If you expect to earn a similar amount to last year, your AGI from last year is a good starting point to project what you’ll make in the upcoming year. Adjust it up or down depending on how much you expect to make this year. You’re just trying to give it your best guess.
Once you have your expected AGI, run that number through the appropriate tax rate schedule. This will give you your owed tax. Then divide your owed tax by four to find what you owe for each quarter.
When you’re calculating what you owe each quarter, keep in mind that you need to pay 25 percent of the total that you expect to owe in a year, instead of estimating what you’ll owe in each quarter. This can be tricky for self-employed taxpayers with income that varies throughout the year.
Step 2: Mail in your Form 1040-ES.
You can find the correct address on the IRS website.
Step 3: Choose a payment method.
You can select a payment method on the IRS website. You can also mail your check with Form 1040-ES.
What happens if I don’t pay quarterly taxes and wait until April?
If you owe more than $1,000 in taxes and don’t pay taxes quarterly, you’ll get an underpayment penalty from the IRS.
However, you may be able to avoid the penalty if either of the following apply to you:
You didn’t pay due to a disaster or an “unusual circumstance.”
You retired or became disabled during the tax year.
Learn how to declare these waivers on page two of the instructions for Form 2210.
When are quarterly taxes due in 2024?
The first deadline in 2024 is for your last quarterly payment for 2023. That date is January 16, 2024.
*Note: If you file your 2023 return by Jan. 31, 2024, and ensure that your entire balance owed is submitted with that return, you do not have to make the Jan. 16 payment.
The rest of the 2024 quarterly tax deadlines are:
Q1 Deadline: April 15, 2024
File estimated taxes for January 1 to March 31Q2 Deadline: June 17, 2024
File estimated taxes for April 1 to May 31Q3 Deadline: September 16, 2024
File estimated taxes for June 1 to August 31Q4 Deadline: January 15, 2025
File estimated taxes for September 1 to December 31
