Who Needs to Pay Quarterly Estimated Taxes?
Self-employed individuals, freelancers, and 1099 contractors who expect to owe $1,000 or more in tax for the year generally must pay quarterly estimated taxes, since no employer is withholding tax from their income throughout the year.
Self-Employment Tax Explained
In addition to regular federal income tax, self-employed individuals pay self-employment tax of 15.3% on net earnings — this covers the Social Security (12.4%) and Medicare (2.9%) contributions that an employer would normally split with you as a W-2 employee. You can deduct half of this self-employment tax when calculating your income tax.
Frequently Asked Questions
Self-employed individuals, freelancers, and 1099 contractors expecting to owe $1,000+ in tax for the year generally must pay quarterly, since no employer withholds tax from their income.
Self-employment tax is 15.3% (12.4% Social Security + 2.9% Medicare) on net self-employment earnings, replacing the employer/employee split that W-2 workers have. It's calculated in addition to regular income tax.
The IRS can assess an underpayment penalty, calculated based on how much you underpaid and for how long, even if you pay your full tax bill by the April filing deadline. Paying quarterly avoids this penalty.