When you are a freelancer or an independent contractor, you’re considered self-employed. And like most business owners, it also means you're responsible for paying self-employment and income taxes. Quarterly estimated taxes help you proactively pay those taxes as you earn money throughout the year.
In most cases, you must pay estimated taxes if you expect a tax bill of at least $1,000 after subtracting any withholding and refundable credits. Even if you owe more than $1,000 when you file, you won’t be assessed an underpayment penalty if your total withholding and timely estimated tax payments equal at least 90 percent of your expected 2018 tax liability, or 100 percent of your 2017 tax liability (or 110% if your 2017 AGI was more than $150,000 or $75,000 if married filing separately).
That means if your 2017 tax liability was zero, you are not required to make estimated tax payments for 2018. However, you may still choose to make quarterly payments so you’re not faced with a huge bill at tax time.
You can either complete the 2018 Estimated Tax Worksheet or pay 100 percent (or 110 percent as described above) of your 2017 tax liability. Once you calculate your total estimated tax for the year, simply divide that number by four. If you missed a payment, be sure to adjust the subsequent payments accordingly.
IMPORTANT NOTE! Even if you pay sufficient tax for the entire year by the fourth quarter, you may still be assessed an underpayment penalty if you did not pay the minimum required amount by the due date each quarter. All taxpayers are expected to pay taxes as they earn income throughout the year.
To estimate your 2018 tax payments, login to your 2017 TaxAct return and follow the steps below:
Once you calculate how much to pay each quarter, there are several ways to make estimated tax payments.
If you figure your quarterly payments with TaxAct, you can print the payment vouchers and mail them to the IRS along with a check or money order.