Quarterly estimated taxes: a survival guide for the self-employed

When you work for yourself, no one withholds tax from your pay. The IRS expects you to pay as you go — four times a year. Here’s how to get it right.

Who needs to pay?

Generally, you should make estimated payments if you expect to owe $1,000 or more in federal tax when you file, after withholding and credits. That commonly includes:

• Freelancers, 1099 contractors and sole proprietors
• Partners and S-corp shareholders with pass-through income
• Landlords with rental profits
• Investors with significant gains, dividends or interest

Mississippi has its own estimated tax requirement for individuals who expect to owe state tax, with the same general due dates.

When are payments due?

Notice the “quarters” aren’t equal — the second one is only two months long.

How much should you pay?

You can avoid an underpayment penalty by paying the smaller of:

• 90% of this year’s total tax, or
• 100% of last year’s total tax (110% if last year’s adjusted gross income was over $150,000).

The prior-year “safe harbor” is popular because it’s predictable: you know the number at the start of the year. Remember to include self-employment tax — 15.3% on most net earnings — not just income tax.

A good rule of thumb: set aside 25–30% of every payment you receive in a separate savings account for taxes.

How to pay

1. Use IRS Direct Pay or your IRS online account (free).
2. Pay through EFTPS if you already use it for business taxes.
3. Pay Mississippi estimates through the state’s Taxpayer Access Point (TAP).
4. Keep confirmation numbers — you’ll need the totals when you file.

What if income is uneven?

If most of your income arrives late in the year, the annualized income installment method can reduce or eliminate penalties for earlier quarters. It takes more work, but we can calculate it for you.