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Quarterly Estimated Tax Payments

As a contractor, you're responsible for paying your taxes throughout the year instead of waiting until April. The IRS requires you to make quarterly estimated tax payments four times annually to avoid penalties and manage your cash flow better.

Why Quarterly Payments Matter

Unlike employees who have taxes automatically taken from their paychecks, you're your own boss. This means you need to set aside money and pay the IRS directly. If you expect to owe $1,000 or more in taxes for the year, you must make these quarterly payments.

When to Pay

  1. Q1: January 1 - March 31 (due April 15)
  2. Q2: April 1 - May 31 (due June 15)
  3. Q3: June 1 - August 31 (due September 15)
  4. Q4: September 1 - December 31 (due January 15)

How Much to Pay

The safest approach is paying 25% of last year's total tax bill each quarter. If your income is growing, consider paying 25% of what you expect to owe this year instead.

Using JobsPaid to Plan Your Payments

  1. Go to Reports in your dashboard
  2. Select Profit & Loss for the current quarter
  3. Review your total income minus expenses
  4. Multiply your quarterly profit by your tax rate (typically 25-30% for most contractors)
  5. Navigate to Expenses and create a new expense category called "Estimated Taxes"
  6. Record each quarterly payment to track what you've already paid

Setting Up a Tax Savings System

  1. Open a separate savings account for taxes
  2. Transfer 25-30% of each payment you receive immediately
  3. Use the Expenses section to track these transfers
  4. When quarterly deadlines approach, you'll have the money ready

Common Mistakes

Don't wait until the deadline to calculate what you owe. Start planning at least two weeks early.

Don't forget about self-employment tax (15.3%) on top of income tax. This catches many new contractors off guard.

Don't skip a quarter thinking you'll catch up later. Penalties apply to each missed quarter individually.

Related Articles

• Setting Up Expense Categories for Tax Deductions • Tracking Business Expenses with Receipt Photos • Year-End Tax Preparation Checklist

Stay organized and pay as you go - your future self will thank you! 📊