If you’re self-employed, a freelancer, or run your own business, you’ve probably heard the term estimated taxes tossed around. It sounds simple enough, but it’s one of those topics that can trip people up every year. I’ve seen many business owners caught off guard by a big tax bill in April—often because they didn’t realize they were supposed to make payments along the way.
Let’s clear that up.
When you work for an employer, taxes are withheld automatically from your paycheck. But when you work for yourself, no one’s doing that for you. The IRS expects you to pay taxes on your income as you earn it, and that’s where estimated taxes come in.
You generally need to make estimated payments if you expect to owe at least $1,000 in taxes after subtracting any withholding and credits. This applies if your income isn’t subject to regular withholding—like freelance projects, business income, side gigs, or even investment earnings.
The key word here is expected. You don’t have to know your final numbers perfectly. You’re simply estimating based on what you think you’ll earn for the year.
Estimated taxes are paid quarterly, and the due dates follow a pretty regular schedule:
April 15, June 15, September 15, and January 15 of the following year. If a due date falls on a weekend or holiday, the IRS automatically shifts it to the next business day.
So how do you figure out what to pay? The IRS provides a worksheet in Form 1040-ES
Sources: