What is Quarterly Taxes?
Four estimated tax payments made annually by freelancers to cover income and self-employment tax, due every three months.
Definition
Quarterly taxes are the four estimated tax payments that self-employed individuals must make to the IRS (and usually state tax authorities) throughout the year. Unlike W-2 employees who have taxes withheld from each paycheck, freelancers and independent contractors receive their full payments gross — and are responsible for remitting taxes on those payments quarterly. Each quarterly payment covers roughly 25% of your expected annual tax liability for income tax and self-employment tax combined.
Who Must Pay Quarterly Taxes
Any freelancer, independent contractor, or sole proprietor who expects to owe $1,000 or more in federal taxes for the year must pay quarterly taxes. This applies regardless of whether you also have W-2 employment income. If your only income is freelance and you expect to owe less than $1,000, you may still need to file a return but can pay annually. If you have a W-2 employer withholding taxes, you may be able to adjust your W-4 withholding instead of making quarterly payments.
How to Calculate Quarterly Payments
The IRS Form 1040-ES is the official tool for calculating estimated taxes. The simplest approach: estimate your annual freelance income after expenses, calculate the tax (income tax + self-employment tax) on that amount, and divide by four. A practical shortcut many freelancers use: set aside 25–30% of every freelance payment received in a separate savings account — this covers both quarterly tax payments and any remaining annual tax owed. Adjust quarterly if your income varies significantly throughout the year.
Avoiding Penalties
The IRS charges an underpayment penalty if you do not pay enough in quarterly estimated taxes. The safe harbor rule protects you from penalties if your quarterly payments equal at least 100% of last year's total tax liability (or 110% if your AGI exceeded $150,000 in the prior year). This means if you made $80,000 last year and owed $15,000 in taxes, you can avoid penalties by paying $3,750 per quarter this year — regardless of whether your income increased. You will still owe more at tax time if income went up, but you avoid the penalty.
Paying Quarterly Taxes
Federal quarterly taxes can be paid through IRS Direct Pay (free, immediate), the EFTPS system (requires enrollment), or by mailing a check with a Form 1040-ES voucher. State quarterly taxes are paid through your state Department of Revenue website. Mark quarterly tax due dates on your calendar as recurring events — missing a quarterly payment deadline, even by a day, can trigger IRS penalties and interest. Eonebill's income tracking helps you project your annual tax liability throughout the year.