Home › Self Employment Resources › Avoid Tax Penalties

results found for 1.5 million freelancers in the US

Tax Form Wizard

Find out which forms you'll need with this tax form recommender.

How would you describe yourself?

Choose as many as you like


Freelancer, independent contractor, etc

Salaried employee

Full-time or part-time W-2 employee

Business owner

LLC, S corp or partnership

How to Avoid Tax Penalties When You’re Self-Employed

You’re now living the dream as someone self-employed. You’re setting your own schedule, choosing your clients, soaking in the flexibility and following your dreams. There’s a lot of freedom that comes with working for yourself. But now that you're the boss, tax responsibilities fall on your shoulders too. It’s up to you to know which forms to fill out and file, the deadlines and the reporting requirements. Failing to know and understand the tax regulations could land you with some hefty penalties. Let’s look at some of the ways to avoid self-employment tax penalties.

Table of contents

Key Takeaways:undefined...Read more

Estimated quarterly tax paymentsundefined...Read more

How to make quarterly tax paymentsundefined...Read more

How to avoid self employment taxundefined...Read more

Penalty for self employment taxundefined...Read more

Waved Penaltiesundefined...Read more

Key Takeaways:

  • Estimated quarterly tax payments are part of self-employment tax
  • There are different types of tax penalties
  • You can avoid penalties by filing on time and making accurate payments

Estimated quarterly tax payments

When making estimated quarterly tax payments, there are a few things to keep in mind. Estimated quarterly taxes are paid to the IRS four times a year. You make these payments for the income you’ve received that didn’t have taxes taken out. For example, if you work as a freelance writer and are paid per article, the client pays you one flat fee for your article. The client doesn’t take any taxes out of your payment and you still need to pay taxes on that payment. On the other hand, if your side gig is in freelance photography and you still work a W-2 job, you still need to pay taxes on the income you received from the photography gig. This might be your first year working as a freelancer or self-employed person, and you might be asking yourself, do I have to pay quarterly taxes my first year? Regardless of how long you’ve been freelancing, you still have to pay quarterly taxes if you made $400 or more.
Estimated quarterly tax payments
If you made any income from dividends, interest, realized capital gains or prizes, you’ll also need to pay quarterly taxes on this income. For example, if you won a sweepstakes competition and the prize was $10,000, you’d have to pay federal taxes on your prize cash.

How to make quarterly tax payments

As you make income from your gig, freelancing work or business, the IRS sets deadlines for the estimated quarterly tax payments. But the amount depends on estimated tax liability. You’ll need to calculate your estimated quarterly tax payments. A quarterly tax calculator can help you get a more accurate estimate. Estimated tax payments are made quarterly or four times a year.
How to make quarterly tax payments
You can make the payment electronically through the Electronic Federal Tax Payment System or you can pay using the IRS form. Paying on time and making an accurate payment will help avoid tax penalties.

How to avoid self employment tax

Nowadays, it’s nearly impossible to avoid paying self-employment tax with updated regulations and close monitoring by the IRS. But there are ways to reduce your self-employment tax. Forming an S-Corp may reduce your taxable income because you’d pay yourself a portion of it as salary and the remaining in dividends, which aren’t subject to self-employment tax. One sure way to reduce your tax liability is to increase your business expenses. This will increase your net income and simultaneously reduce your self-employment tax. Things like itemized or standard deductions won’t reduce your self-employment tax, and healthcare contributions won’t reduce it either. But Section 179 deduction allows you to deduct the cost of some fixed assets you use for your business.

Penalty for self employment tax

One penalty for self employment tax is the underpayment penalty. This happens when you don’t pay enough on your quarterly tax payment. The IRS wants to ensure that you make an accurate payment and will penalize you for underpaying. The penalty amount depends on how much you owe, how long the amount has been unpaid and the current underpayment interest rate. If you're wondering what happens if you don’t file self employment taxes, well, there’s another self employed tax penalty for failing to pay or skipping a payment. Missing the deadline might not seem like a big deal, but to the IRS, it is, and they will notice. The longer you wait to make the payment, the bigger your penalty. It will also depend on how much you owe. Let’s say your funds are running out, and the deadline is approaching. It’s better to pay at least some of the amount owed to lower your penalty.

Waved Penalties

In some circumstances, the IRS may waive some tax penalties. Don’t get your hopes up too high as there are certain requirements. They can’t just let everyone get away with not following the rules. Let’s say you were in a disaster such as your family home burnt down or a tornado or flood hit your town, and due to this unforeseeable circumstance, you couldn’t make your estimated quarterly tax payment. In those cases, the IRS might waive your penalty and say it wasn’t equitable to impose a penalty. You also might have a penalty waived if there’s a casualty, like the death of the taxpayer’s spouse, or say your car broke down in the middle of the desert on a road trip, and you had to wait for your car repair to get home. There’s certain unusual circumstances in which you just might have your penalty waived.
Waved Penalties
If you meet certain conditions, you can fill out penalty waiver Form 2210 to request the waiver of your penalties. Along with the form, you’ll need to write and attach an explanation as to why you didn’t make the payment and the time period for the requested waiver. So it’s best to brush up on your storytelling skills. We know the IRS loves a good investigation and looks into things with great detail. That said, you’ll need to provide them with documentation relating to your circumstance. Documentation might include things like a birth certificate that shows your age, a medical document that states your disability, proof of your retirement date or any proof from a disaster, death or unusual situation. It also might include insurance claims or a report from the police.

Independent contractor taxes in california

Independent Contractor Taxes in California

Top Independent contractor jobs

Top Independent Contractor Jobs

About Self Employment

Self-employment Simplified – For Freelancers, Independent Contractors & Gig Workers

Freelance Vs Self Employed

Self-employed Vs. Freelancers – What’s Common & What’s Not

About Gig Economy

How the Gig Economy Works for Freelancers | FlyFin

Mortgage for Self Employed

Getting a Mortgage as a Self-Employed Individual | FlyFin

How to calculate your self employed salary

Calculating Your Self-employment Income | FlyFin

What is self employment tax

What Every Freelancer Should Know About Self Employment Taxes


How to Pay SECA Taxes the Smart Way

Tax Deductions for self employed

Self-Employed Tax Deductions

Avoid Tax Penalties

How to Avoid Tax Penalties When You’re Self-Employed

Retirement plans for self employed

Retirement Plans for Anyone Self-Employed

Health Insurances for Self Employed

How Self-employed people Choose Health Insurance | FlyFin

1099 Employee Rights

Know Your Rights as a 1099 Employee

1099 and W2 in same year

Is It Best To File 1099s and W-2s Seperately or Together? | FlyFin

Open Business Banking accounts

Opening a Business Account for Professional Use | FlyFin A.I.

Benefits of 1099

A Guide to Understanding 1099 Jobs | FlyFin A.I.

When are 1099s Due?

When is Form 1099 Due? | FlyFin A.I.

What are Freelance Taxes?

The Definition of Freelancer Taxes - Important Date and Forms | FlyFin A.I.

What do Independent Contractors do

Employee Vs. Contractor – A Watch At Their Taxes

Independent contractor taxes in california

Independent Contractor Taxes in California

Top Independent contractor jobs

Top Independent Contractor Jobs

About Self Employment

Self-employment Simplified – For Freelancers, Independent Contractors & Gig Workers

Freelance Vs Self Employed

Self-employed Vs. Freelancers – What’s Common & What’s Not

What’s FlyFin?

FlyFin caters to the tax needs of freelancers, self employed people and sole proprietors. But anyone can file taxes through FlyFin! FlyFin tracks all your business expenses automatically using A.I. to find every possible tax deduction. Then, the 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. Download the FlyFin app and have your taxes filed in less than fifteen minutes, saving time and more money on your taxes than last year, guaranteed.
Is this article helpful for you?