What freelancers and side hustlers need to know about quarterly taxes

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One of the scariest parts of freelancing for me is dealing with money. I consider myself an artist, and don’t want to be bothered with things like finances and taxes.

But in order to be successful as a freelancer, I have to stretch myself a little and do things I don’t care to. Taxes aren’t fun, but not paying them could have disastrous consequences and even land you in jail (ask Wesley Snipes).


screen-shot-2016-10-19-at-4-20-42-pmThis article is brought to you by our partners at AND CO. With a sleek app and a real-life human on your side, AND CO is all you need to take the headache out of billing as a freelancer. Our partnership has not affected the value or content of this article. Learn more at and.co


Some of you may be working full-time and freelancing is your side hustle. But if you make over a certain amount of money (you’ll have to check with your local taxing authority for the exact numbers), you may still have to pay taxes on what you make.

Sidenote: Once you finish, read how 4 freelancers built recurring revenue models that changed their business. You'll love it.

That’s why I wanted to talk to you today about quarterly taxes.

What are they? Who pays quarterly taxes, and how do you pay quarterly taxes?

How do you file those taxes, and what happens if you don’t?

Many questions revolve around tax preparation and filing for freelancers, but thankfully it doesn’t have to seem that complicated for much longer.

You'll also enjoy this episode of our new podcast...

What are quarterly taxes?

The IRS requires businesses and some individuals to pay taxes four times a year once you get to a certain level of tax obligation (we’ll talk more about that in a minute).

These taxes are estimated taxes, which means you’ll have to have an idea of how much money you expect to make for the year in order to know if you need to file. They are separate from your income tax, which you still must file on a yearly basis.

Quarterly taxes are due at the end of each quarter:

  • Quarter 1, Jan 1 – Mar 31: April 18
  • Quarter 2, Apr 1 – May 31: Jun 15
  • Quarter 3, Jun 1- Aug 31: Sep 15
  • Quarter 4, Sep 1 – Dec 31: Jan 17

You can pay your quarterly taxes by filing a form 1040-ES and mailing a check to the IRS, or you can file and pay online.

In addition to federal quarterly taxes, your state may also require you to pay these taxes as well. Check with your state taxing authority to learn more.

Who has to pay quarterly taxes?

If you’re an individual, sole proprietor, in a partnership or an S corporation shareholder, you’ll need to pay quarterly taxes if you expect to owe at least $1,000 in taxes in the upcoming year. Corporations that expect to owe at least $500 are required to pay as well.

If freelancing is your side hustle, ask your employer to change your withholding to avoid having to make quarterly tax payments.

What are the consequences of not paying or inaccurate payments?

What happens if I don’t pay quarterly taxes?

If you don’t make any quarterly tax payments at all, you’ll be subject to penalties. I’ve heard horror stories of newly self-employed individuals who never paid their taxes and ended up going out of business once the IRS caught up with them.

Freelancers, entrepreneurs, independent workers, and small business owners alike can get in trouble with the IRS for not paying taxes.

You are also liable for penalties if you purposely underpay or overpay your quarterly taxes. However, the IRS only applies penalties to overpayers if they are purposely overpaying in order to get large refunds later.

Your best bet as a freelancer is to pay the exact amount you’re supposed to pay to avoid any possible issues in the long run.

After all, your small business or side hustle is your hobby or passion. It’d be ridiculous to lose everything over taxes.

How to figure your quarterly tax obligations

If you Google quarterly taxes, you’ll find a variety of formulas for figuring out your quarterly tax payments. Since I am literally frightened by math, I choose to use a calculator instead.

My favorite calculator is AND CO’s Quarterly Tax Calculator, and not because they are this article’s partner. The calculator uses a cute little chatbot to ask you questions about your financial situation and come up with your tax payment. You’ll know how much to pay in taxes in minutes.

I happen to have a thing for one-eyed blue aliens, and the conversational tone of the bot doesn’t make me feel like an idiot. Taxes are all of a sudden easier for freelancers like you and me.

Wrapping it up

Don’t let your fear of finances stop you from getting your side hustle on. You are your own boss now, so you can learn to do it all easily.

If you don’t feel comfortable doing your own quarterly tax calculations, use a calculator to help. What are your experiences with quarterly taxes? We’d love to hear about them in the comments!

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About Sharon McElwee

Sharon McElwee is a copywriter and freelance business coach dedicated to help people get better at making real money doing what they love. Check out her free e-course to earn an extra $1000 in the next 30 days.

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Comments

  1. Thank you for this! Much needed information for the freelance community!

  2. Sharon, do you use and.co’s service? I’ve been using QuickBooks Online, and while it works fine, and.co has a few features that QB is missing, like time tracking and contracts. It’s also much cheaper too. Just wondering if you or anyone else here can give an objective opinion on and.co.

  3. semoga bisa dapet dan sukses selalu ya
    thanks