Estimated Payments

Generally, self employed individuals do not have federal and state income taxes, social security or medicare withheld from their pay. While this may sound like a loophole, it's not. In Fact, it means that self employed taxpayers are subject to some additional responsibilities. Each quarter, the IRS requires that these taxpayers make estimated quarterly tax payments. It is important that business owners plan on setting aside a portion of their income to cover federal and state income taxes as well as self employment tax. Apps like Hurdlr can automatically calculate your estimated taxes, taking into account your income and expenses, so you know what is safe to spend and what you should set aside for ongoing tax payments.


Speedy Wheeler is a driver for Uber and is considered to be a self employed contractor, not an employee. Uber does not withhold any taxes when they deposit fares into Speedy's account so Speedy always makes sure to set enough aside to make his quarterly estimated tax payments.


Gina Gogetter, a Washington D.C. based realtor took home $400,000 in commissions last year. Gina chose to celebrate her success by moving into a larger home, purchasing a sports car and flying her extended family to Monaco for a reunion. When Gina filed her taxes, her accountant told her she owed $140,000 thousand in taxes from her commissions. Unfortunately, Gina had already spent everything and ended up paying penalties and interest on the unpaid taxes for the next two years while she worked hard to make enough money to pay down her balance.


Homer House has a 9 to 5 job and occasionally rents a room in his apartment out on the weekends through Airbnb. Homer chose not to make any estimated tax payments on his hosting income. At the end of the year when Homer prepared his taxes he ended up owing some some money in addition to what was withheld from his paycheck (because of his rental activities) but he had planned ahead so making the additional payment was easy.


Rich is a science fiction writer who has diligently paid his estimated taxes on time for years. Since Rich hadn't published anything new this year he thought his tax liability was going to be lower than the prior year so his estimated payments he had been making were less than prior years. Unbeknownst to Rich, a book he had published years ago made the NYT best seller list due a renewed interest in life on Mars. Needless to say, when Rich filed his taxes he found out the payments he was making did not cover 90% of the tax due on his current return, or 100% of the tax due in the prior year so he was subject to an underpayment penalty.


Mohammad is an avid service provider on Taskrabbit. He didn't know about estimated tax payments until he visited 99deductions in July, and by that point he had already missed the first two quarterly payment deadlines. Mohammad remembered the old adage “a dollar today is better than a dollar tomorrow” and figured the IRS would agree. He estimated his tax liability for the first two quarters and sent in the second payment voucher from the bottom of Form 1040-ES along with a check to the IRS on July 20th. The government happily accepted his tax payment even though it was a little late. When Mohammad prepared his tax return at the end of the year, he still owed some interest for his late payment, but not nearly as much as he would have owed if he let the overdue payments ride all year.


  • The best way to remit your estimated taxes to the IRS is to complete Form 1040 ES and send in your quarterly tax payment vouchers. You should visit your state's tax and revenue website for state specific payment vouchers. By making estimated quarterly payments you will be in compliance with IRS requirements and save on interest and penalties.
  • You can compute your estimated quarterly taxes based on your prior year earnings or by projecting your current year income.
  • Your estimated tax payments are due on the following dates: April 15th, June 15th, September 15th and January 15th.
  • Your Self Employment Tax liability will be included as part of your estimated tax payment if you use Form 1040 ES to calculate your estimated payments.
  • You will be subject to underpayment penalties unless you make estimated payments equal to 90% of the tax shown on your current year return or 100% of the tax shown on your prior year return, whichever number is smaller. If your 2016 AGI was higher than $150,000 ($75,000 if your filing status for 2017 is married filing a separate return), you must pay the lesser of 90% of the current year's taxes or 110% of prior year's taxes. If you did not have any tax liability in the prior year or owe less than $1,000 you will not be subject to underpayment penalties. In addition to penalties, you will also have to pay non-compounding interest on any underpaid taxes at the federal rate, which was 4% in 2017.

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