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A Comprehensive Guide To Estimated Tax Payments

2024-taxes

A Comprehensive Guide To Estimated Tax Payments

If you struggled with your estimated tax payments in 2023, this guide is for you. We’ll break down everything you need to know about IRS estimated tax payments, the quarterly tax dates for 2024, how to pay estimated taxes online and how to file quarterly taxes.

Table of contents

Are estimated tax payments the same as quarterly tax payments?...Read more

What are quarterly taxes?...Read more

Who has to make quarterly tax payments?...Read more

Do estimated tax payments include state taxes?...Read more

How to calculate quarterly tax payments...Read more

How to pay quarterly taxes...Read more

What happens if you miss estimated tax payments?...Read more

How to file quarterly taxes...Read more

Are estimated tax payments the same as quarterly tax payments?

Before we get into the finer details, we have to clear up a common question among new freelancers, “Is paying estimated taxes and quarterly taxes the same thing?” Quarterly taxes, also called estimated taxes, estimated quarterly taxes or estimated tax payments, all mean the same thing— paying taxes as you go when you're self-employed. We’ll be using both “estimated tax payments” and quarterly tax payments” interchangeably throughout this guide.

What are quarterly taxes?

Small business owners, independent contractors and gig workers have to manage their own taxes. That means staying on top of your tax obligations by paying the IRS what you expect to owe throughout the year. These payments, known as quarterly tax payments, are calculated based on your business earnings from the previous quarter. It is essential that every freelancer and small business owner understands the importance of making estimated tax payments to the IRS. Part of this responsibility is knowing when to make these payments throughout the year to avoid getting fined.

When are the quarterly tax payments due in 2024?

Who has to make quarterly tax payments?

For many self-employed individuals, estimated tax payments to the IRS are just part of the deal, especially if your self-employed business is your main source of income. Basically, the IRS wants you to pay taxes on your income as you earn it. If you end up underpaying during the year, the IRS might slap you with penalties for late payments. Plus, making those federal estimated tax payments helps you avoid getting hit with a huge tax bill in April. To put it simply, you might need to make quarterly tax payments if:
  • You expect to owe $1,000 or more in taxes from your self-employed income
  • You earned $400 or more in 1099 income
But, there's one exception to this rule. If you didn't owe any taxes for the previous year, as long as it was a 12-month period and you were a U.S. citizen or resident for the whole year, you don't have to make estimated tax payments for the current year. If you have both self-employed income and work as a W-2 employee, you can raise your tax withholding through your employer to cover the taxes you’ll owe from your self-employed income. But it's a good idea to ask a CPA first to make sure it's the best choice for you.

Do estimated tax payments include state taxes?

Estimated tax payments typically include both federal and state taxes. If you're self-employed, you're generally required to make quarterly tax payments to cover both your federal and state tax liabilities. However, the rules can vary by state, so make sure to check the specific requirements on your state’s website or by contacting a local tax pro.

How to calculate quarterly tax payments

It’s not always necessary for freelancers and self-employed individuals to calculate their estimated taxes manually. Using an estimated tax calculator to find your quarterly tax payments is an efficient way to avoid miscalculations. However, you’ll need to do a bit of estimating before using any online calculator, so it’s worth knowing how the entire process works. Let’s use a real-life example to better understand this. Say you’re a freelance consultant who needs to make federal estimated tax payments. You expect to earn $80,000 in self-employment income for the year. You are a single filer and don’t have any other sources of income. To calculate your quarterly taxes, you first estimate your adjusted gross income (AGI). AGI is calculated by subtracting above-the-line deductions from estimated income. For the year, you expect to deduct $3,000 for health insurance premiums and $4,000 for a traditional IRA contribution.
  • AGI is $80,000 - $3,000 - $4,000 = $73,000
Next, you subtract the standard deduction for single filers from your AGI to find your taxable income. The standard deduction for single filers in 2024 is $14,600. Your adjusted taxable income is:
  • $73,000 - $14,600 = $58,400
Using the 2024 income tax brackets, you calculate your estimated income tax. Your taxable income falls within the 12% tax bracket, so your estimated income tax is:
  • $11,600 * 0.10 = $1,160
  • ($58,400 - $11,600) * 0.12 = $46,800 * 0.12 = $5,616
  • Total income tax is $1,160 + $5,616 = $6,776
In addition to income tax, you also need to pay self-employment tax on your 1099 income. The self-employment tax rate is 15.3%. Self-employment tax is generally calculated on 92.35% of net earnings. To find net earnings, you need to deduct all ordinary and necessary expenses from your gross income. You can use a 1099 tax calculator to easily do this. For this example, let’s say you have $5,000 in deductible business expenses.
  • $80,000 - $5,000 = $75,000
  • $75,000 * 0.9235 * 0.153 ≈ $10,597.2
So, your total tax liability is the sum of income tax and self-employment tax:
  • $6,776 + $10,597.2 ≈ $17,373.2
To find estimated quarterly tax payments, you divide your total tax liability by four:
  • Estimated quarterly payment = $17,373.2 / 4 ≈ $4,343.3
This is a basic example of how quarterly taxes are calculated. In some cases, freelancers may be eligible for the QBID (Qualified Business Income Deduction), tax credits or may have unique expenses that may require more calculations. For this reason, it is always a good idea to rely on a professional or use an online calculator to do the math for you.
Infographic entitled How To Calculate Quarterly Taxes showing steps to find quarterly tax payments in 2024.

What if my self-employed income fluctuates?

How to pay quarterly taxes

The IRS offers many ways to make both annual and quarterly tax payments. If you prefer paying estimated taxes online, IRS Direct Pay is a great option. It lets you make your payment directly from your bank account, without any extra fees. Another online option is the Electronic Federal Tax Payment System (EFTPS). While it requires you to make an account first, it provides detailed payment tracking, which can help keep accurate records. If you're paying estimated taxes online, it's a good idea to set up your account before your quarterly payments are due as the process may take several days. The IRS also allows you to pay by wire transfer or credit or debit card, subject to fees. If you're more traditional, you can always mail a check or money order to the United States Treasury. Be sure to include the 1040-ES payment voucher to help the IRS process your payment easily.
Infographic entitled How To Make Estimated Tax Payments To The IRS listing ways to pay quarterly taxes.

What happens if you miss estimated tax payments?

If you messed up some estimated tax payments in 2023, you probably racked up some fines from the IRS. If you miscalculate your estimated tax payments, you’ll be hit with the underpayment penalty. This penalty generally starts at 0.5% of the unpaid amount and increases every month you don’t pay. It also comes with interest which also adds up every month, so you want to avoid this penalty at all costs. Most tax experts will tell you to stick to the “safe harbor” rule when paying quarterly taxes online. This just means paying at least 90% of your current year’s taxes or 100% of your previous year’s taxes to avoid underpayment penalties.

How to file quarterly taxes

Form 1040-ES is the most important form for making estimated tax payments to the IRS. This form is available on the IRS website and comes with a worksheet you can use to figure out your estimated tax liability. You should save these calculations for filing your annual tax returns and in case of an IRS audit. You only need to file this form’s payment vouchers if you are making quarterly tax payments by mail order or check. Freelancers and self-employed individuals can use FlyFin’s AI to find business deductions that can lower their estimated taxes. There are also built-in calculators that calculate SE tax, quarterly taxes and any outstanding tax penalties. CPAs offer unlimited tax support including helping you stay on top of the 2024 quarterly tax dates and answering questions about how to file quarterly taxes.

2024 Tax Filing

The tax filing deadline for the 2024 tax year is April 15, 2025. This is also the last day to file a tax extension. FlyFin is the best online tax filing tool for the self-employed.

2024 Tax Laws

Tax laws are always changing. FlyFin’s expert CPAs can monitor these changes and help you navigate them while handling your filing process and lowering your tax bill.

2024 Tax Brackets

Explore the changes in 2024 tax brackets and rates. Learn how they impact your finances, with insights on federal and state taxes, deductions, and effective tax rates.

Tax Brackets - 2023 Vs 2024

The new 2024 tax brackets have higher income thresholds as they are adjusted for inflation. Freelancers can lower their tax bracket by writing off business deductions.

2024 Self employment Tax

Self-employment tax is paid by self-employed individuals who earn over $400. The self-employed tax rate is 15.3% of net earnings. Use tax deductions to lower taxes.

2024 IRS Mileage Calculator

The IRS mileage rate in 2023 was 65.5 cents/mile. In 2024, it was increased to 67 cents/mile. Self-employed individuals can also write off mileage-related tax deductions.

2024 Tax Credits

Tax credits reduce tax liability. There are many tax credits available to taxpayers. FlyFin’s CPAs can help you navigate the process.

2024 Tax Filing

The tax filing deadline for the 2024 tax year is April 15, 2025. This is also the last day to file a tax extension. FlyFin is the best online tax filing tool for the self-employed.

2024 Tax Laws

Tax laws are always changing. FlyFin’s expert CPAs can monitor these changes and help you navigate them while handling your filing process and lowering your tax bill.

2024 Tax Brackets

Explore the changes in 2024 tax brackets and rates. Learn how they impact your finances, with insights on federal and state taxes, deductions, and effective tax rates.

Tax Brackets - 2023 Vs 2024

The new 2024 tax brackets have higher income thresholds as they are adjusted for inflation. Freelancers can lower their tax bracket by writing off business deductions.

What’s FlyFin?

FlyFin caters to the tax needs of freelancers, gig workers, independent contractors and sole proprietors. But anyone can file taxes through FlyFin! FlyFin tracks all your business expenses automatically using A.I. technology. Then, our CPA team files a guaranteed 100% accurate tax return for you – to save you a couple thousand dollars and a ton of time on your taxes. In addition, you can download the FlyFin app and have your taxes filed in less than fifteen minutes, saving time and money.
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