Do I Have to Pay Quarterly Taxes? 2025 Guide

In your first year of self-employment, you need to pay quarterly taxes if you expect to owe $1,000 or more in taxes. These payments cover self-employment taxes, including Social Security and Medicare, and are due every three months. Employees typically don't pay quarterly taxes because their employers withhold taxes from their paychecks. Missing deadlines results in penalties. Track due dates using tools like Bonsai Tax to manage expenses and maximize savings. Understanding these obligations helps you avoid surprises and ensures compliance with IRS requirements.

If you are a self-employed freelancer or business owner, you need to make estimated tax payments if you meet certain requirements. Quarterly estimated tax payments are how self-employed taxpayers pay their taxes to the IRS throughout the year. These payments are made every three months and cover self-employment taxes, Social Security, Medicare, and income tax.

Employees don't have to pay taxes quarterly. That's because their employers withhold taxes from their paycheck before they even receive the money. If you have a W-2 full-time or part-time job, you'll typically receive a tax refund.

In this article, we'll go over who has to pay estimated taxes, the due dates, exceptions to the rule, and the penalties if you miss payments.

Note: if you don't want to miss quarterly tax deadlines and also track your business expenses, try Bonsai Tax. Our tax software will scan your bank/credit card receipts to discover potential tax write-offs and help you maximize your savings. Users usually save $5,600 from their tax bill with our software. Try a 7-day free trial today.

Who has to pay estimated quarterly taxes?

Freelancers, independent contractors, and small-business owners who anticipate owing at least $1,000 in taxes, even after accounting for withholding and refundable credits from self-employed income, need to pay quarterly taxes.

This is your taxable income, the part of a self-employed worker's income used to calculate how much tax they'll owe to the IRS in a given tax year. For example, if your annual revenue is $45,000 and you claimed $15,000 in business deductions, your taxable income would be $30,000.

Even if their employers withhold taxes from their paychecks, people with rental income and assets may need to pay estimated quarterly taxes.

Self-employed individuals who owe less than $1,000 can pay their taxes when they file their annual tax returns. You must pay your taxes as you go under the law.

If you have not paid enough tax through withholding or quarterly estimated payments by the time you file your taxes, you may be subject to a penalty for underpayment. This penalty rate will be explained later.

Quarterly tax payments are estimates. At the end of the tax year, you still need to file an annual tax return. Consult a tax professional to determine if you need to file estimated tax payments.

Fishermen And Farmers

If certain criteria are met, fishermen and farmers need to pay estimated taxes. If farming or commercial fishing account for more than two-thirds of your taxable gross income, you qualify as a farmer or fisherman.

Guidelines to determine if you have to pay estimated taxes

According to the IRS, individuals, such as sole proprietors, partners, and shareholders in S corporations, may be required to make anticipated tax payments if:

• When they file their annual return, they expect to owe tax of at least $1,000.
• They had a tax debt from the previous year.

Some taxpayers are required to make projected tax payments, such as those who:

• Interest, dividends, alimony, capital gains, prizes, and awards are examples of non-employer income.
• Had tax deducted from their wage or pension, but it is insufficient
• Has more than one employment but does not have taxes withheld by each employer.
• Os a sole proprietor.
• Is a salesperson for a direct-sales or in-home-sales firm.
• When they are not working as employees, they participate in sharing economy activities.

In short, you don't want to miss out on payments.

Taxes self-employed people have to pay

In addition to annual tax returns, self-employed people are responsible for paying estimated quarterly taxes. A self-employed individual pay quarterly taxes to cover Social Security tax, Medicare tax and income tax.

In 2024, the tax rate is:

• Self-employment tax rate: 15.3% (Social Security (12.4%) and Medicare (2.9%)

High earners who make over $200,000 may be subject to an additional Medicare tax.

How to estimate your first-year quarterly tax payments

Determine if you need to pay quarterly taxes in your first year

You generally have to pay quarterly taxes in your first year if you expect to owe at least $1,000 in taxes after subtracting withholding and credits. The IRS requires self-employed individuals, freelancers, and small business owners to make estimated tax payments to avoid penalties. This applies even if it’s your first year filing taxes.

For example, if you start freelancing in 2024 and expect to earn $20,000 with little or no tax withholding, you likely need to pay estimated taxes quarterly. However, if you had a full-time job with tax withholding covering your tax liability, you might not need to pay quarterly taxes on your freelance income.

To avoid surprises, use IRS Form 1040-ES to check your estimated tax obligation. This form helps you calculate whether you meet the threshold for quarterly payments. Starting early with these estimates can save you from penalties and interest later in the year.

Calculate your estimated quarterly tax payments

Estimating quarterly taxes in your first year involves projecting your annual income, expenses, and deductions to calculate your expected tax liability. Begin by estimating your total income from all sources for the year, including freelance earnings. Then subtract business expenses and applicable deductions like the standard deduction, which is $14,600 for single filers in 2024.

Next, apply the current tax rates to your taxable income. For 2024, federal income tax rates range from 10% to 37%, depending on your income bracket. Don’t forget to include self-employment tax, which is 15.3% on net earnings. For example, if you expect $20,000 in net income, your self-employment tax would be roughly $3,060.

Divide your estimated total tax by four to determine your quarterly payments. You can use online calculators like the IRS Tax Withholding Estimator or software like TurboTax Self-Employed to simplify this process. Adjust your estimates each quarter as your income changes to avoid underpayment or overpayment.

Make your quarterly tax payments on time

Quarterly tax payments are due four times a year: April 15, June 15, September 15, and January 15 of the following year. Paying on time is crucial to avoid penalties and interest charges. For your first year, keep track of these deadlines and set reminders to stay organized.

You can make payments electronically using the IRS Direct Pay system, the Electronic Federal Tax Payment System (EFTPS), or through tax software like QuickBooks or TaxAct. These platforms allow you to schedule payments in advance, which helps prevent missed deadlines.

After each payment, keep a record of your receipts and update your estimated tax calculations for the remaining quarters. If your income fluctuates, adjust your payments accordingly to stay on track. Consistent monitoring and timely payments will help you manage your tax obligations smoothly throughout your first year.

Common mistakes first-time quarterly taxpayers make

Failing to estimate income accurately

Many first-time quarterly taxpayers make the mistake of underestimating their income, which leads to underpaying taxes throughout the year. The IRS requires you to pay taxes based on your expected annual income, so if you guess too low, you might face penalties when you file your return.

For example, if you expect to earn $40,000 but actually make $60,000, your quarterly payments will be too small. The IRS charges interest and penalties on the difference, which can add up quickly. Using tools like the IRS Tax Withholding Estimator or tax software such as TurboTax Self-Employed can help you create more accurate estimates for 2024.

To avoid this mistake, review your income regularly and adjust your quarterly payments if your earnings change. Keeping detailed records and updating your estimates each quarter ensures you stay on track and minimize surprises at tax time.

Missing payment deadlines

Missing quarterly tax deadlines is a common error that can result in costly penalties. The IRS sets four payment deadlines each year:

• April 15
• June 15
• September 15
• January 15 of the following year

Paying late or skipping a payment triggers interest charges and late fees.

For instance, if you miss the June 15 deadline in 2024, you will owe penalties on the unpaid amount until you make the payment. Many new freelancers forget these dates because they are used to annual tax payments. Setting calendar reminders or using apps like QuickBooks Self-Employed can help you stay organized and pay on time.

To avoid penalties, mark these dates clearly and consider scheduling payments a few days early. If you realize you missed a deadline, pay as soon as possible to reduce interest and fees.

Not keeping adequate records of expenses

Failing to track business expenses properly is a frequent mistake among new quarterly taxpayers. Without accurate records, you might overpay taxes by not deducting eligible expenses, or underpay and risk an audit. Expenses like home office costs, supplies, and mileage can significantly reduce your taxable income.

Using tools like Expensify or the expense tracking features in FreshBooks can simplify this process. For example, logging mileage with apps such as MileIQ can help you claim the standard mileage deduction for 2024, which is 65.5 cents per mile. Proper documentation supports your deductions and ensures you pay the correct amount each quarter.

Make it a habit to record expenses weekly and keep digital copies of receipts. This practice not only helps with accurate quarterly payments but also makes tax filing smoother and less stressful.

Ignoring state and local tax obligations

New taxpayers often focus only on federal quarterly taxes and overlook state or local tax requirements. Many states require estimated tax payments on a quarterly basis, and failing to pay can lead to additional penalties and interest. For example, California and New York have their own deadlines and payment rules that differ slightly from the IRS.

Check your state's Department of Revenue website or use platforms like TaxJar to understand your state’s quarterly tax deadlines and rates for 2024. Some states also require sales tax payments if you sell goods, which is a separate obligation from income taxes.

To stay compliant, create a tax calendar that includes both federal and state deadlines. Consult a tax professional if you operate in multiple states to ensure you meet all requirements and avoid unexpected charges.

State taxes and quarterly estimated payments for new filers

How state taxes affect your quarterly estimated payments

State taxes often require quarterly estimated payments just like federal taxes, but the rules vary widely by state. Many states expect new filers, including freelancers and small business owners, to pay estimated taxes if they expect to owe $1,000 or more when filing their annual return. This means you likely need to make quarterly payments if your income is substantial enough, even in your first year.

For example, California requires estimated payments if you expect to owe at least $500 in state tax after subtracting withholding and credits. Meanwhile, Texas has no state income tax, so no quarterly payments are necessary there. Knowing your state’s specific threshold and deadlines is crucial to avoid penalties.

To stay compliant, check your state’s department of revenue website or use tools like TaxAct or TurboTax, which can estimate your state tax liability and remind you of payment deadlines. This proactive approach helps you budget for taxes and avoid surprises at year-end.

When new filers can avoid quarterly payments in their first year

New filers can sometimes avoid making quarterly estimated payments if their expected tax liability is low or if they had no tax liability the previous year. The IRS and many states offer safe harbor rules that protect you from penalties if you pay a certain percentage of your previous year’s tax or 90% of your current year’s tax through withholding or estimated payments.

For instance, if you started freelancing mid-year and your income is under $12,000, you might not owe enough to require quarterly payments. Some states, like New York, allow new filers to request a waiver or reduce estimated payments if they can show that their income is below the threshold. However, this varies, so it’s important to verify with your state tax authority.

Use your first few months’ income data to estimate your annual earnings. If you expect to owe less than the state’s minimum, you can skip quarterly payments safely. Otherwise, setting aside a portion of your income each month will prepare you for any required payments.

Practical steps to manage state quarterly taxes as a new filer

Start by registering with your state’s tax agency as a new business or self-employed individual. This registration often provides access to online portals where you can file and pay estimated taxes easily. Many states allow electronic payments, which can be scheduled in advance to avoid missed deadlines.

Next, track your income carefully using accounting software like QuickBooks Self-Employed, FreshBooks, or Bonsai Tax. These tools can categorize your earnings and expenses, helping you calculate estimated taxes accurately. They also integrate with tax filing software to simplify quarterly payment calculations.

Finally, set reminders for quarterly payment deadlines, which typically fall on April 15, June 15, September 15, and January 15. Missing these deadlines can lead to penalties and interest. By staying organized and using available tools, you can confidently manage your state tax obligations from your first year onward.

What happens if you skip estimated tax payments?

If you are required to file quarterly tax payments and you forget or decide to skip them, you will have to pay an underpayment penalty. To avoid this penalty, make your payments on time and send in the correct amount. Here are the due dates for estimated taxes.

When are estimated quarterly taxes due?

The quarterly deadlines are as follows:

• April 15
• June 15
• September 15
• January 15 of the following year

• April 15 - First quarter (January 1 – March 31)
• June 15 - Second quarter (Aril 1 – May 31)
• September 15 - Third quarter (June 1 – August 31)
• January 15 of the following year - Fourth quarter (September 1 - December 31)

How to calculate estimated quarterly tax payments

After determining if you need to pay estimated quarterly taxes, calculate and send the proper amount to the IRS. If you expect a similar income as the previous year, refer to your expected gross income from that year (company's gross revenue minus business expenses). Adjust the amount based on what you expect to earn this year.

The formula to calculate your quarterly tax payments is straightforward. Once you have your expected adjusted gross income, take your total tax liability for the year—including self-employment tax, income tax, and other taxes—and divide that number by four.

You don't need to send 25% of the total you expect to owe for the year if you estimate what you'll owe each quarter.

There are many free online tools to help you calculate your payment totals. If you overpaid your quarterly taxes, you'll receive a tax refund at the end of the year. Payments are reported via Form 1040-ES, which calculates the total taxable income of a taxpayer and determines how much is to be paid or refunded by the government. Use IRS Form 1040-ES to figure and pay your estimated tax. Use the IRS 1040-ES worksheet if your income varies each year.

Estimated tax payments should be paid as soon as you start earning money as a self-employed worker. They must be sent by April 15, June 15, September 15, and January 15 of the following year.

If it is your first year self-employed, you won’t need to pay quarterly taxes by withholding. However, if you expect to earn a significant amount, it is wise to send estimate payments to avoid a large tax bill at the end of the year or on your April tax return.

Higher income taxpayers have different rules for quarterly taxes. If your adjusted gross income for the year is over $150,000, you must cover 110% in estimated taxes.

To avoid an estimated tax penalty, pay at least 90% of your previous year's tax liability through withholding, estimated, or additional tax payments, or a combination of the two. If you don't, you may owe an estimated tax penalty when you file your return.

Penalties for missing estimated tax payments

If you skip out on quarterly tax payments, you'll have to pay an estimated tax penalty. The penalty amount will accrue based on how late you are and how much you make. Essentially, the IRS will add a penalty of .5% of the tax owed after the due date. This penalty amount will continue to accrue from the day your quarterly payment is due until the day it is paid. There is a penalty limit of 25% of the taxes owed.

Typically, taxpayers don’t have to pay a penalty if they meet any of these conditions:

• They owe less than $1,000 in tax with their tax return.
• Throughout the year, they paid the smaller of these two amounts:
• at least 90 percent of the tax for the current year
• 100 percent of the tax shown on their return for the prior year – this can increase to 110 percent based on adjusted gross income

For example, let's say you paid $5,000 in taxes last year. You'll send in equal payments of $1,250 this year. If you calculate your taxes at the end of the year to be $7,000, pay the $2,000 difference at tax time to avoid a penalty.

If it turns out that you overestimated or underestimated your earnings, you can always recalculate your estimated tax for the next quarter by completing another Form 1040-ES.

You'll most likely need to attach an extra form — IRS Form 2210 — to your annual return to explain why you didn't send equal quarterly payments.

A sure-fire way to avoid penalties is to pay for 100 percent of your previous year's taxes by each of the quarterly deadlines.

What are IRS approved exceptions for missing estimated tax deadlines?

The IRS provides exceptions to penalties for missing estimated quarterly tax payments. Let's review some common circumstances where you might get a break.

• If you were a victim of a casualty, disaster or other unusual circumstance
• If you’re at least 62, retired or became disabled this year or last year and your underpayment was due to “reasonable cause” rather than neglect.

How to file estimated quarterly taxes

The IRS has made it really easy to send in estimated payments throughout the year. You can select a payment method via the IRS website or mail in a check with your Form 1040-ES.

Just use the Electronic Federal Tax Payment System (EFTPS) to submit payments electronically.

You could also mail in a Form 1040-ES.

Read our full detailed guide for how to send quarterly tax payments.

If you are a small business owner who has questions about filing or sending in estimated tax payments, we always recommend you consult with a tax professional.

They can help you file Form 1040-ES, set up automatic withholding from your bank account and answer any tax questions to keep you in line with the IRS's rules. A designated CPA or accountant can help you with your specific tax situation.

How to never miss an estimated tax deadline

Estimated taxes are meant to help business owners to prepare to pay their tax duties. If you want an app to help you record all your tax receipts and remind you of your quarterly tax deadlines (so you don't have to pay unnecessary penalties), then try Bonsai Tax.

Our app can help you estimate your self-employment income tax, send you important filing reminders, and maximize your tax deductions.

Users typically save $5,600 with our app. Try a 7-day free trial today.

This article is meant to be a resource. Tax laws are always changing. If you have any questions about self-employment tax rates, quarterly estimated tax payment totals, or if you need to pay estimated taxes in the first place, we always recommend you talk to a tax advisor. A CPA or accountant can help you answer any estimated tax questions and help you properly file your tax return.