When you work for an employer, taxes are withheld from each paycheck automatically. When you're self-employed, freelancing, or running your own business, that responsibility falls on you — and the IRS expects you to pay as you earn throughout the year.
# What Are Estimated Taxes?
Estimated taxes are quarterly payments made to the IRS (and often your state) to cover income tax and self-employment tax on income that isn't subject to withholding. If you expect to owe $1,000 or more in taxes for the year, you're generally required to make estimated payments.
# Who Needs to Pay?
- Freelancers and independent contractors
- Business owners and sole proprietors
- Partners in a partnership or S-Corp shareholders receiving pass-through income
- Anyone with significant investment income not covered by withholding
# The Quarterly Schedule
The IRS uses four payment deadlines each year (approximate):
- **April 15** — for income earned January–March
- **June 15** — for income earned April–May
- **September 15** — for income earned June–August
- **January 15** — for income earned September–December
Missing deadlines or underpaying can result in penalties, even if you pay your full tax bill in April.
# How Much Should You Pay?
The safest approach is the **safe harbor rule**: pay either 100% of last year's tax liability (110% if your AGI exceeded $150,000) or 90% of this year's expected liability — whichever is less.
# Practical Tips
1. **Set aside a percentage of every payment you receive** — typically 25–30% depending on your income level and state taxes.
2. **Open a separate savings account** for tax funds so the money isn't accidentally spent.
3. **Review your estimates mid-year** — income fluctuations can mean you're over or underpaying.
4. **Work with a CPA** to calculate accurate estimates and adjust as your income changes.
Getting estimated taxes right keeps your cash flow predictable and prevents stressful surprises each April.
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