5 Things Every Freelancer Should Know About Quarterly Taxes
If you freelance consistently, it is likely that you will be required to file quarterly taxes instead of yearly taxes. Most new (and even a few seasoned) freelancers don’t realize that if you paid more than $1,000 in taxes for freelance work the previous year or expect to pay more than $1,000 in taxes in the current year you are required to pay your taxes on a quarterly basis.
But how do you know how much to pay each quarter? Luckily the IRS understands that it is not always easy to predict freelance work volume, so they have a handy 1040-ES form to help you estimate your quarterly taxes and tell you when they are due.
While it may initially seem like an inconvenience to estimate and pay your taxes quarterly, many freelance professionals prefer this method because it lessens the financial burden of making one lump payment at the end of the year. Navigating quarterly payments for the first time can be confusing, but to help you out, we compiled the five most common questions freelancers ask about quarterly taxes:
If you paid more than $1,000 in taxes for freelance work the previous year, yes, you have to pay quarterly taxes. Failure to do so will result in a penalty and you will be fined for interest on the amount of the each missed quarterly payment, which could add up by the end of the year.
What happens if I pay too much?
Since the nature of freelance work is unpredictable, it can be difficult to estimate exactly what you should pay. If you overpay your taxes the surplus will be rolled over to your taxes for the following year. If you underpay one quarter, you can make up the difference the next quarter or when you file your yearly taxes in April the following year.
Do I have to pay the same amount each quarter?
Luckily, you can adjust your quarterly taxes as necessary. If you have a slow period or lose a client, you do not have to overpay your taxes. But if you have an influx of work, remember that you will need to make up that difference by the end of the year, so it may be better to pay a little more the following quarter.
How will I remember when they are due?
The IRS will tell you on the 1040-ES form for that year. For 2017, quarterly taxes are due:
April 18, 2017
June 15, 2017
September 15, 2017
January 16, 2018
How do I pay my quarterly taxes?
The IRS makes it easy to make your quarterly tax payments through their Electronic Federal Tax Payment System (EFTPS.) EFTPS is a free, secure government service that allows users to make their federal tax payments online or over the phone.