Quarterly taxes, or estimated tax, is a method of paying tax on income that is not subject to tax withholding. If you work as an independent contractor or freelancer on a 1099, taxes aren't taken out of the money you're paid. This means you're responsible for paying both your federal and state taxes.
Who needs to pay quarterly taxes?
Here’s a general rule-of-thumb from the IRS for determining if you should be paying taxes quarterly:
If you expect to owe more than $1,000 in taxes for the year for your independent contractor or freelancer work (which is around $3,000 or more in profit), then you should consider paying quarterly taxes.
What amount do you pay?
Catch will help you stay prepared for quarterly taxes, but it’s up to you to determine exactly what you owe the IRS each quarter. Here are two forms you can use to calculate and file quarterly taxes:
- Schedule C: Input your 1099 income plus any related expenses. This total is then subject to self-employment taxes, federal income tax, and state income tax. The Schedule C isn’t required for paying quarterly taxes but it’s helpful to have.
- 1040-ES: Use this worksheet for calculating exactly what you owe in quarterly taxes.
Keep in mind, even if you make estimated tax payments, you may still owe taxes when filing your return at the end of the year.
When do you pay?
Here are the quarterly tax deadlines for income earned per year:
How do you make a quarterly tax payment?
There are three ways to submit your tax payment:
- Catch: Payment can be sent directly to the IRS from using the funds you have saved in your Tax Plan with Catch. If you are processing your payment through Catch, we recommend submitting it at least 24 hours before the IRS due date. See here for more details.
- Electronic: Payment must be submitted by 8pm ET the day before the due date. This can be done via a system called EFTPS.gov.
- Physical Mail: Payment should be postmarked on or before the due date. First, print and fill out a 1040-ES form for the corresponding quarter (for example: September 15th would be the Q3 Voucher). Then write a check to the United States Treasury for the amount owed. Finally send it to the nearest IRS mail center.
If you're withdrawing from your Catch account to pay on your own, we recommend factoring in at least 3 business days for processing time. Better safe than sorry.
What happens if you don’t pay?
If payments aren’t made quarterly when due, you may have to pay a penalty.