Typically, there are taxes taken out of every paycheck by your employer. However, when you’re an independent contractor, you have to do this yourself. These taxes are called estimated quarterly taxes that you submit to the government. If it’s your first time paying these quarterly taxes, you might have a lot of questions. In this guide, we’ll go over some of the 5 most common questions about quarterly taxes for independent contractors, including when you need to pay and how much.
If I’m an independent contractor, why do I have to pay quarterly taxes? As a salaried employee, your employer takes taxes out of your paycheck for you and sends it to the IRS. When you’re self employed or an independent contractor, you have to do this yourself. Since you don’t have a typical payroll schedule, you would send quarterly payments to the IRS instead. Not all independent contractors have to pay taxes. Generally, if you owe more than $1000 in taxes, you can expect to pay quarterly. That’s equal to about $5000 in income.
How do I know how much taxes to pay? As an independent contractor, you have to calculate how much taxes you have to pay yourself. You can do this using the IRS form 1040-ES or the Estimated Tax for Individuals. This form will help you calculate the estimated taxes you have to pay each quarter based on your past earnings.
When do I have to pay my taxes? Estimated taxes are paid quarterly so keep this schedule in mind:
- For quarter 1 or January 1 – March 31, pay by April 15th
- For quarter 2 or April 1 – May 31, pay by June 15th
- For quarter 3 or June 1 – August 31, pay by September 15th
- For quarter 4 ot September 1 – December 31, pay by January 15th of the next year.
If the due date falls on a weekend or holiday, you should pay by the next business day.
How do I pay them? By the due date for each quarterly payment, you can pay in one of two ways:
- You can pay by mail. On your 1040-ES, you will find a voucher for each quarter. While you don’t have to send your actual 1040-ES form, you should send one voucher and a check to the address listed on the form by the due date.
- You can also pay electronically. You can do so via the IRS Direct Pay.
What happens if I forget to pay? If you fail to pay your taxes, you might be faced with a fine. The penalty will be on the amount you underpaid, about 6 to 8% of that total amount. Visit the IRS website to learn more about taxes for independent contractors.