Calculate Quarterly Estimated Tax Payments
Calculate how much to pay each quarter. Avoid IRS underpayment penalties for freelancers and business owners.
Who Must Pay Quarterly Taxes
You must pay quarterly estimated taxes if you expect to owe $1,000 or more in federal tax after subtracting withholding and credits. This applies to: freelancers, independent contractors, small business owners, landlords, investors with significant capital gains, and retirees without adequate withholding.
Safe Harbor Rules
You avoid underpayment penalties if you pay the greater of: 90% of current year tax or 100% of prior year tax (110% if AGI exceeds $150,000). The safe harbor method using 100/110% of prior year is easier because you know that number exactly. The current-year method requires estimating income — risky if your income fluctuates.
The easiest way to handle quarterly taxes: open a separate savings account and transfer 30% of every freelance payment into it immediately. Then pay quarterly taxes from this account. This removes the temptation to spend tax money and ensures you always have enough for quarterly payments.
