75% of freelancers overpay on their taxes
Most freelancers don't consider tax deductions while estimating quarterly taxes. This leads to either overpayments or penalties.
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You can review the deductions, and answer a few basic questions to accurately calculate quarterly tax payments in just 5 minutes.
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Never miss a deadline! FlyFin notifies you before your quarterly taxes are due; and you always stay on top of taxes!
You might think paying self-employment taxes is an annual occurrence, but it might actually happen more frequently than you think. If you’re new to the world of self-employment, it’s a good idea to familiarize yourself with how to calculate quarterly taxes.
You can calculate them by yourself or you can use an estimated tax calculator. You just need to enter a few details about your tax situation, and an estimated tax payments calculator can easily find your owed tax liability.
1099 workers have to calculate estimated tax every year as they may need to make this payment every quarter if they think their income will result in a tax amount over $1,000. Figuring out how much estimated tax to pay with a calculator will make tax season much easier to navigate.
Self-employment tax (or SECA tax) needs to be paid by every 1099 worker who makes over $400 in income every year. The SECA tax is set at a rate of 15.3%, with 12.4% towards Social Security, and 2.9% for Medicare.
But the SECA tax isn’t paid once a year like the federal income tax. The IRS taxes this income as it is earned, so this isn’t a problem for W-2 employees. But self-employed individuals are in charge of paying their own taxes, so they have to make these tax payments themselves.
The IRS knows that self-employed income isn’t always the same every year. That’s why they allow taxpayers to make estimated payments every quarter. These payments will only have to be made if the tax owed crosses $1,000.
This is why freelancers, small business owners, gig workers and independent contractors use an estimated taxes calculator to find their earned income for the year rather than try to calculate it themselves.
So you know that estimated taxes have to be paid if the tax amount is over $1,000. But you might be wondering, “How much are estimated quarterly taxes?”, and if there’s a limit to how much tax you’ll have to pay.
Unfortunately, there is not. If your income is over the threshold limit, you’ll have to pay SECA tax. And if you think you’ll make enough to owe over $1,000, you have to make the estimated tax payments.
Apart from just calculating your owed tax, an estimated tax calculator can also find deductions you can claim. To calculate estimated tax, you’ll need to either enter the number of business expenses you’re writing off or choose what you are eligible to write off from a list of deductions.
A 1099 quarterly tax calculator can find deductions like health insurance premiums, advertising costs and internet expenses. Say you’re a part-time photographer who earned $8,000 in the months of January to April 2023, and expect to earn this amount each quarter throughout the year.
You also spent $2,500 on travel expenses, equipment and vehicle mileage. This means your taxable income is $5,500 for the first quarter of 2023.
You decide to use an estimated taxes calculator and find that your income for the whole year is approximately $27,500. Your total owed tax for 2023 is $4,208, or about $1,052 per quarter. Using your tax deductions has saved you $778. That’s the power of a quarterly tax estimator!
A quarterly tax calculator only needs a few pieces of information from you to estimate your tax amount. Think tax info like the state you live in, your filing status, your job , all the business expenses you want to write off and your income for the year.
Certain estimated tax calculators (like FlyFin) can even find your tax deductions for you (like retirement contributions), making that step so much easier. If you live in New Jersey all year but are moving to another state at the end of the year, you should still enter your state as New Jersey because that is where all your income comes from.
If you’re a full-time 1099 worker, you’ll need to total all your income sources to get your gross income. This means any money earned from gig work, freelancing, operating as a small business or an independent contractor.
So, how to calculate quarterly taxes? Use a tax calculator,enter all the basic tax information required and get a tax breakdown of your total liability and quarterly payments. Then, you just fill out Form 1040-ES and make your payments.
Usually, estimated taxes are paid on a quarterly basis. The payment deadline for each quarter falls on the 15th of the month (or the next working day). If you are can’t pay your taxes by the deadline, you will be fined by the IRS.
Another thing to remember is that once you calculate your quarterly taxes, you can pay them off in one go. You don’t necessarily have to wait until the end of each quarter to make your estimated tax payments.
You can face two types of penalties: the late penalty and/or the underpayment penalty. It’s pretty easy to avoid the late penalty fees. All you need to do is just pay your taxes on time. To avoid the underpayment penalty, you can do a couple of things.
The first option is to use a 1040-ES calculator to pay 100% of the tax you owed last year. This is an easy way to avoid penalty fees, especially useful if your income does not fluctuate as often.
The second option is to pay at least 90% of your tax liability for this year if you think you’ll make less than you did last year. As this is an estimated payment, you can pay a little over 90% as a safety net to avoid an underpayment penalty. This is known as the “safe harbor” rule.
If your AGI (adjusted gross income) was over $150,000 as a single filer, you’d need to pay 110% of last year’s tax liability to fulfill the safe harbor rule. The last option is to pay 100% of your current year’s tax liability if you think your income is going to be more than what you made last year.
A tax penalty calculator is a good tool to check whether you owe the IRS any penalties. You can also use this to calculate IRS payment plans. The penalties usually get higher the longer you put off paying your tax liability, so it’s a good idea to pay them off as soon as you can.
So you now know how to use an estimated tax calculator and how to calculate your quarterly taxes. Now we will tell you how you can make these tax payments to the IRS. The easiest way to do this is to pay directly on the website.
You can also use the IRS app, in both Spanish and English, IRS2Go to make your estimated tax payment. Another way to use the information you got from a quarterly tax calculator is to pay using the EFTPS.
Also known as the “Electronic Federal Tax Payment System,” this method allows you to view all your previous tax payments and tax returns. You’ll need to make an account to register (don’t worry, it’s free), and you can start making your payments.
If you’re looking to make these payments the old-fashioned way, you can still send the IRS checks. All you have to do is attach them to Form 1040-ES, which you’ll use to make these quarterly payments. Make sure to add your social security number or tax ID, mention the year of payment on the check and send it in without stapling it to the form.
If you’re really old school, you can even call in and pay the IRS over the phone. You’ll need an EFTPS account to do this, and you’ll also have to pay them a small fee. If you don’t have an EFTPS account, you can still pay over the phone, but you’ll have to call a third-party provider.
The last way to pay the IRS after calculating quarterly taxes is to increase your W-2 withholding amount. Now obviously, this will require you to already have W-2 income. So, W-2 employees have their income tax withheld from their employer. You can ask to have this amount increased to cover your quarterly tax payments with the help of Form W-4.