The article below is up to date based on the latest tax laws. It is accurate for your 2018 taxes, which you will file by the April 2019 deadline. Learn more about tax reform here.
If you’ve taken the plunge into self-employment, congrats on being your own boss! Whether you’re working as a contractor or making money in the fast-growing sharing economy, don’t forget you may need to pay quarterly estimated taxes. The last estimated tax deadline for the tax year 2018 is January 15, 2019.
Are you prepared? If not, don’t worry – we’ve got the info you need to know!
Who is Subject to Estimated Taxes?
In the United States, we have a “pay as you go” tax system. That means the government expects to receive most of your taxes throughout the year. Because of this, employees have a certain amount of taxes automatically withheld from their paychecks.
On the other hand, if you are self-employed as a freelancer, contractor or home-based entrepreneur, you most likely don’t have taxes withheld from your pay throughout the year and are instead subject to quarterly estimated taxes. In general, you are expected to pay estimated taxes if you expect to owe $1,000 or more annually for your taxes.
For the 2018 tax year, quarterly estimated taxes are due by April 18, 2018, June 15, 2018, September 17, 2018, and January 15, 2019. Remember, you don’t have to make your 2018 4th quarter payment if you choose to file your full 2018 tax return by January 31, 2019, and pay the entire balance due with your return.
However, if you skipped making a quarterly payment or pay late, you may be subject to a penalty. If you earn your self-employment income unevenly during the year, you may be able to use annualized installment method at tax time and avoid a tax penalty for not paying estimated taxes every quarter due to fluctuating income.
When Are Estimated Taxes Due?
The good news is the IRS has a schedule to help you figure out when you need to pay. Here’s the schedule for 2018 taxes:
- 1st Quarter (January 1 – March 31): April 18, 2018 (This takes into account the one-day extension to file taxes)
- 2nd Quarter (April 1 – May 31): June 15, 2018
- 3rd Quarter (June 1- August 31): September 17, 2018
- 4th Quarter (September 1 – December 31): January 15, 2019
If the 15th falls on a weekend or a holiday, then the due date is the next weekday. Don’t forget that the final fourth quarter payment for your 2018 taxes is January 15, 2019.
How Can I Figure Out My Estimated Taxes?
You can use QuickBooks Self-Employed to track your income, expenses, mileage, and figure out your estimated taxes year round. The program does the math for you and helps you figure out your estimated taxes so you can easily make the estimated tax deadline. At the end of the year, QuickBooks Self-Employed gives you the ability to export your Schedule C information from QuickBooks Self-Employed to TurboTax Self-Employed to make your annual tax filing easier.
When you prepare your taxes at tax-time, TurboTax can also automatically calculate your estimated tax payments and print out payment vouchers for you to send into the IRS. You can also use TurboTax TaxCaster to get an estimate of your tax situation and see if you should make an estimated tax payment. TurboTax TaxCaster is updated to reflect the new Tax Reform Law passed at the end of last year so estimates will take into account the new 20% qualified business income deduction provision in the new law.
How Can I Pay Estimated Tax Payments?
Now that you know what you owe, it’s time to get your payment in. Fortunately, you have a few options:
- QuickBooks Self-Employed allows you to electronically file your quarterly estimated tax payments to the IRS. E-filing is fast and results in fewer errors because you won’t have to re-enter information into your checkbook or the IRS computer system.
- You can pay your taxes using the Electronic Federal Tax Payment System (EFTPS), to pay your estimated taxes. Besides making instant payments, it’s also free.
- You can mail in your payment. The IRS has specific mailing addresses based on the state where you live. Please be aware that your payments should be postmarked by the due date to avoid penalties.
Tips on Making Your Quarterly Tax Payments Easier
- Forget filling out handwritten forms: When you use QuickBooks Self-Employed for your business, the program will figure out your estimated taxes for you. TurboTax can also figure out and generate your estimated payment vouchers automatically when you prepare your taxes using TurboTax.
- Keep a record of all your estimated tax payments: You will need to enter estimated taxes you paid when you file your taxes.
Don’t worry about remembering all of this information. TurboTax Self-Employed has you covered and will help you uncover business expenses to help you save on your taxes. If you have questions as you are filing your taxes, you can connect live via one-way video to a TurboTax Live Self-Employed CPA or Enrolled Agent to get your tax questions answered. A TurboTax Live Self-Employed CPA or Enrolled Agent can also review, sign, and file your tax return.
Do you pay quarterly estimated taxes? Do you have any additional tips for those just starting their own businesses?