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 amounts to around $3,000 or more in profit) then you should consider paying quarterly taxes.
What 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.
When do you pay?
Here are the quarterly tax deadlines for income earned per year:
Note: See here for guidance on 2019 and 2020 estimated tax deadlines.
How do you submit a tax payment?
There are three ways to submit your quarterly tax payment:
- Catch: You can send a payment directly to the IRS from using the funds you have saved in your Tax Plan with Catch. To make a payment, go to your Tax Plan and click “withdraw” then choose “make a payment”. See here for 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 that 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.
When withdrawing savings from your Catch Tax Plan, we recommend factoring in at least 3 business days’ 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.