Quarterly taxes, or estimated tax, is a method of paying tax on income that is not subject to withholding tax. 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.
How 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.
When do you pay?
Here are the quarterly tax deadlines for income earned this year:
How do you submit a payment?
There are two ways to submit your quarterly tax payment:
- 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 Withholding account, 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.