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Some self-employed workers and independent contractors have to pay quarterly taxes.
The due dates for these taxes are the 15th of April, June, and September. The final payment is due January 15th of the following year.
In general, if you expect to have a tax liability of $1,000 or more, then you should estimate and pay quarterly taxes on your earnings.
This article was reviewed for accuracy and clarity by Luis Rosa, an expert on Personal Finance Insider’s tax review board.
Most people who earn a steady paycheck only think about paying taxes when they sit down to file their tax return once a year.
But if you don’t earn a salary or hourly wage where you pay federal taxes through withholdings, you might have to send tax payments to the IRS every quarter. Self-employed people and gig workers typically pay taxes this way.
Alternatively, you can estimate your federal tax liability for the entire year and pay in full by Tax Day, which is April 15.
Table of Contents: Masthead StickyWhen are quarterly taxes due in 2021?
Each tax year is divided into four payment periods. January 15, 2021, is the deadline for quarterly payments on income earned from September 1 to December 31, 2020 — however, you can skip the deadline if you pay and file your tax return by February 1.
Here are the due dates for income earned in 2021:
April 15, 2021 — taxes due on earnings from January 1 – March 31, or for the full year ahead
June 15, 2021 — taxes due on earnings from April 1 – May 31
September 15, 2021 — taxes due on earnings from June 1 – August 31
January 15, 2022* — taxes due on earnings from September 1 – December 31 (*since the 15th falls on a Saturday, it’s not technically due until Monday, January 17)
Who must pay quarterly taxes?
If you expect to have a tax liability of $1,000 or more for the tax year, then you likely have to pay quarterly taxes. If you underpay, you might be subject to a penalty. If you overpay, you’ll get your money back as a refund.
The US tax system operates on a “pay-as-you-go” basis. If you earn money that isn’t subject to withholding from an employer — Social Security and Medicare tax, known as FICA, and income tax — then you’ll have to pay taxes every few months on those earnings, rather than waiting until annual tax returns are due. This can include earnings from the sale of an investment, rental income, dividends, interest, and self-employment income. Also, if you receive unemployment benefits and don’t opt-in to withholding, you’ll be responsible for making quarterly estimated payments.
There’s some math involved in figuring out how much you need to pay in quarterly taxes. Use the IRS Estimated Tax Worksheet or try an online calculator. In both cases you’ll need to estimate your earnings and note the …read more
Source:: Business Insider