Your estimated taxes are due in 2 days. Here’s how to pay

If you worked a side job or did freelance work this year and didn’t pay taxes on the money you earned, listen up. There’s a big IRS deadline coming up. By midnight on September 16, you’ll need to pay estimated taxes on all of the untaxed income you earned from June through the end of August. If you missed the other two earlier estimated tax deadlines in April and June, you can still pay more IRS Penalties for Self-Employed or interest charges when you file your tax return next year.

Income you earn from freelancing, side hustles, contract work, or running your own business may not automatically be taxed. If that’s the case for you, it’s a smart move to make estimated tax payments four times a year. You should also make these payments if you have other income that’s not subject to withholding, such as interest, dividends, capital gains, alimony, cryptocurrency, or rental income.

The Estimated Tax Return Procedure can be complicated, but we’re here to simplify it for you. Here’s everything you need to know to calculate and file your taxes on time.

Read more: Don’t ignore your tax bill. Do this instead

What are estimated taxes?

If you earn or receive income that is not subject to federal withholding tax during the year (for example, income from a part-time job or income from a rental property), you pay each time estimated taxes. Estimated tax is a quarterly payment based on your income for the period. Essentially, estimated tax allows you to prepay a portion of your income tax every few months to avoid paying a lump sum when your tax return is due.

When do I have to pay the estimated taxes?

Estimated taxes are due quarterly, usually on the 15th of April, June, September, and January of the following year. A notable exception is if the 15th falls on a legal holiday or weekend. In those cases, you must file your return by the next business day.

Below you will find the deadlines for estimated taxes for 2024.

Who should pay the estimated taxes?

If you the IRS W-4 FormIf your employer gives you instructions on how much to withhold from each paycheck, you may not have to pay estimated taxes. If you’re not a W-4 payroll employee, you probably need to keep an eye on estimated tax payments. According to the IRS, you generally have to make estimated tax payments if you expect to owe $1,000 or more in taxes when your return is filed, and if your employment type falls into one of these categories:

• Self-employed or freelancer
• Sole proprietorship
• Partner
• S-corporation shareholder

Other sources of income that fall under the estimated tax umbrella include:

• Dividends and interest earned from investment sales
• Royalties for previous work
• Landlord rental income
• Alimony
• Unemployment benefits
• Pension provisions
• Social security benefits, if you have other sources of income
• Awards and distinctions

You may also have to pay estimated taxes as a full-time employee if your employer does not withhold enough from your paycheck. To update your W-4 with the correct amount to withhold, use the IRS Tax Withholding Estimation Toolcomplete a new one W-4, Employee Allowance Withholding Certificate and submit it to your employer.

Estimated taxes are due regardless of whether you pay by direct deposit, check, or digital payment services such as PayPal, CashApp, Zelle or VenmoPlease note: While you should already pay tax on that income, a new rule under the American Rescue Plan requires third-party payment networks to report payments of $600 or more to the IRS.

How do I calculate my estimated taxes?

There are different ways to calculate your quarterly tax payments, depending on your business model and annual revenue.

• If you have a fixed income, estimate the taxes you owe for the year and send a quarter to the IRS each quarter. You should also include your self-employment taxes.

• If your income varies throughout the year, you can estimate your tax burden based on your income and deductions from the previous quarter. The IRS Estimated Tax Worksheet can help you with the calculation.

If you have overestimated your income at the end of the year, you can 1040-ES form to receive a refund or apply your overpayment to future quarterly taxes. If you paid too little in taxes, the form can help you calculate what you still owe.

How do I pay my estimated taxes?

When filing your estimated taxes, use the 1040-ES IRS tax form, or the 1120-W form if you are submitting as a business. You can fill out the form manually using the worksheets provided, or you can rely on your favorite tax software or tax advisor to walk you through the process and get the job done. From there, you can pay your federal taxes by mail or online through the IRS website. You will also find a full list of accepted payment methods and options, including installment plans.

Do I also have to pay estimated state taxes?

It depends. If you live in one of the few U.S. states without an income tax, your responsibility ends with the estimated federal taxes we discussed. If your state does have an income tax, you will pay estimated taxes by the same deadlines as for federal taxes. Visit your state’s Department of Revenue website or consult your tax advisor or tax software service for more personalized information.

What if I don’t pay my estimated taxes?

It is a good idea to set a reminder on your calendar as the quarterly deadline approaches to avoid paying a late fee. You may be charged a late fee if:

• You owe more than $1,000 in taxes after deductions and tax credits.
• You have paid less than 90% of the current year’s tax through estimated taxes.

The penalty can be waived in some situations. If you want to delve further into estimated tax penalties and terms of a waiver, please refer to the instructions on the IRS Guide to Underpayment.

Can I avoid estimated taxes?

Probably not without those penalties. Some groups of employees are exempt from paying quarterly payments to Uncle Sam, notably those who income is exceptionally modest, or for whom the following applies:

• If your net income was $400 or less for the quarter, you don’t have to pay estimated taxes. However, you must still file a tax return even if no taxes are due.
• If you were a US citizen or US resident last year, your total tax was zero And You did not have to file an income tax return.
• If your income fluctuates dramatically throughout the year (for example, if you run a seasonal business), you may be able to reduce or eliminate your estimated tax payments using an annualized income term method. Check with the IRS’s Worksheet 2-7 to see if you qualify.

For more freelance tax advice, read our explanation of tax form 1099-K and check this out The best tips from a business owner to prepare you for paying taxes for your part-time job.