Georgia Finance and Tax Professionals

If you live in Georgia and are self-employed or earn income outside of a regular paycheck, you’ve probably heard about quarterly estimated taxes, and maybe even find yourself unsure of what these taxes mean and how they actually work. Quarterly estimated taxes can sound a bit confusing at first, but essentially, it’s just another way of describing a system for paying your taxes throughout the year instead of all at once. This quarterly tax system helps you avoid surprises (and penalties) when tax season rolls around.

In this helpful guide, the tax experts at RWB Tax Service break down exactly what quarterly estimated taxes are, who this method applies to, how to calculate and pay quarterly taxes, and how to stay proactive to help reduce the dreaded stress that often accompanies tax season.

What Are Quarterly Estimated Taxes?

Quarterly estimated taxes are a way for the IRS to collect small portions of your income throughout the year, instead of all at once when you usually would file your annual tax return. Instead of paying a single lump sum once a year, you make smaller payments four times per year. It’s more of a pay-as-you-go system, similar to how taxes are automatically deducted from the paychecks of salaried or hourly employees each pay period.

However, when you’re self-employed or receive untaxed income, you’re the one responsible for calculating and paying your required quarterly estimated taxes. These payments cover both income tax and, if self-employed, your self-employment tax, which also includes Social Security and Medicare. 

Who Needs to Pay Quarterly Estimated Taxes?

Anyone making money who doesn’t have taxes automatically withheld might need to pay quarterly estimated taxes. So, if you’re self-employed, run a side business, or do freelance or contract work, you probably fall into this category. Essentially, if you're not an hourly or salaried employee receiving a paycheck where taxes are automatically withheld, you are solely responsible for payment of quarterly estimated taxes.

Here’s a breakdown of who typically needs to pay quarterly estimated taxes:

• Freelancers, independent contractors, and consultants.
• People who run a business (sole proprietors, partners in partnerships, etc.).
• Investors with significant income from dividends, interest, or capital gains.
• Retirees who don’t have taxes withheld from Social Security or pension income.

If you expect to owe more than $1,000 in tax when you file your return, chances are you’ll need to make quarterly estimated tax payments. However, there are exceptions. If you had no tax liability last year, or your income is low enough, you might not be required to make payments. But for most people with untaxed income streams, ignoring quarterly payments is a fast track to penalties.

How to Calculate Quarterly Estimated Taxes

Now that you’ve figured out you should be paying quarterly estimated taxes, you may be wondering how much you should pay. Although calculating taxes can initially feel overwhelming or impossible, the process can be broken down into small steps. Approaching it this way can help make figuring out your taxes feel more manageable and less stressful. 

#1 Estimate Your Annual Income

This is the building block that lays the foundation of your tax plan. Having a realistic estimate of your annual earnings is the very first step toward understanding how much you should pay in quarterly estimated taxes.

For freelancers or small business owners, this may include looking at previous years and leaving room for growth or slowdowns. If this is your first year, you can base it on contracts already signed or your average monthly income so far. Investors and landlords should also factor in dividends, rental payments, or potential sales. 

It doesn’t need to be precise; the goal is to be as accurate as possible, making an educated guess. As the year progresses and you gain a clearer picture, you’ll have the chance to make adjustments accordingly. The main idea here is to estimate close enough that your quarterly estimated tax payments aren’t way off.

#2 Estimate Deductions and Credits

Next, look for deductions that can help lower your taxable income. Deductions are extremely helpful. They can include home office expenses (including phone and internet costs and office rental), mileage, supplies, uniforms, and even health insurance premiums, if you’re self-employed. The higher the number of deductions you have results in a lower total amount of taxable income you’ll have to claim. 

Credits take it one step further, because they cut directly from the tax you owe. For example, you may qualify for education credits, child tax credits, or green energy incentives. Considering possible qualifying credits in advance will help create a more realistic estimate. This also helps you avoid overpaying the IRS and waiting months for a refund.

#3 Calculate Your Total Tax Liability

Once you’ve got your business tax income and deductions squared away, it’s time to figure out your actual tax liability.  

Begin with your taxable income, and then apply the IRS tax brackets to calculate what your federal income tax will be. If you’re self-employed, don’t forget the 15.3% self-employment tax that covers Social Security and Medicare. This tax is easy to overlook, but it makes a big difference in your liability. 

After you’ve added the self-employment tax to your taxable income, subtract any credits you qualify for, and this should give you a pretty good idea of how much projected taxes you’ll owe for the year. Helpful tools such as Form 1040-ES or even an online quarterly tax estimator can walk you through the math if it feels overwhelming.

#4 Divide Into Four Payments

Now that you have a solid idea of what your annual taxes will be, the rest is basic math. Divide your total projected tax amount by four, and this is what your quarterly estimated tax payments will be.

We know life doesn’t always go according to plan. If you find your business earns more during certain months (like a holiday sales spike in November-December) or experiences slow periods, you can adjust your payments as you go. 

The IRS is more concerned that you’re paying the correct total amount throughout the year, and less about whether the four payments are split equally. Aiming to make four evenly distributed payments when possible is usually the easiest way to stay on track and avoid last-minute scrambling.

When Are Quarterly Taxes Due?

Quarterly taxes aren’t due on the same day every month; the IRS sets dates each year. These are typically around the 15th of the month, and they fall on these dates most years:

• First Quarter: April 15th
• Second Quarter: June 15th
• Third Quarter: September 15th
• Fourth Quarter: January 15th of the following year

If any of these dates fall on a weekend or holiday, the deadline usually gets pushed to the next business day. Be sure to mark these dates on your calendar, because missing deadlines can result in penalty fees.

How to Pay Quarterly Estimated Taxes

Paying your quarterly estimated taxes is relatively easy, once you know how much you’ll owe. There are multiple ways to submit your payments:

• IRS Direct Pay lets you pay online directly from your bank account.
• EFTPS (Electronic Federal Tax Payment System) is a secure government system you can set up for recurring payments.
• The IRS2Go app makes mobile payments a breeze.
• You can also send a check or money order, along with an IRS Form 1040-ES. However, paying online is faster and more convenient. All you’ll need is your payment amount, the completed IRS form, and a valid payment method. 

Whichever method you choose, always keep records of payments made. Having a detailed paper trail with dates, payment amounts, and confirmation numbers makes tax time so much easier and helps if you ever need to prove quarterly tax payments.

Penalties for Missing or Underpaying

The IRS doesn’t take kindly to people who don’t pay their taxes on time. If you fail to send enough throughout the year, they charge hefty interest and penalties. Even if you pay the full amount due when filing in April, you can still get penalized.

There is a small loophole. The “safe harbor” rule says penalties can be avoided if you pay at least 90% of this year’s tax bill or 100% of last year’s (110% if your income was higher). So, even if your income is unpredictable, sticking to these guidelines helps keep you safe. 

For example, if you earned $50,000 last year and paid $7,000 in taxes, sending at least $7,000 in estimated payments this year should cover you.  If you earn more than expected, you’ll just owe the difference later, without incurring penalties.

Tips for Staying on Top of Quarterly Taxes

Staying on track with your quarterly business taxes is more than simply making on-time payments. It requires building disciplined habits to make the process feel automatic and stress-free. 

Here are some tips to help you stay organized and avoid missing deadlines:

• Set calendar reminders for deadlines to eliminate surprises
• Open a separate savings account solely for your business taxes and make bi-weekly deposits into it
• Use accounting software or apps to track income and expenses
• Keep income and expense records organized throughout the year

The more you plan ahead, the less stress you’ll have to deal with quarterly. If you have any questions (whether it's how to calculate your taxes or which deductions you qualify for), working with a Georgia business tax professional is your best bet. They can help you stay on track and avoid common, costly mistakes.

Contact RWB for Help with Your Business Taxes

Quarterly estimated taxes don’t need to be overly complicated; they’re really just a way to break your tax bill into smaller, more manageable payments. If you’re earning income that doesn’t include automatic withholding, it’s your responsibility to make payments to the IRS throughout the year. The key is estimating how much you’ll owe, dividing it into four payments, and not missing payment deadlines.

Yes, it requires discipline. But setting reminders, having a dedicated tax-savings account, and having tax experts at your side help make it a whole lot more manageable. The last thing anyone wants is a massive tax bill with penalties in April. Paying as you go keeps the IRS happy, allowing you to remain cool, calm, and collected as tax season approaches. Contact RWB Tax Service in Villa Rica, Georgia, for help with all your business tax needs—call us today at 770-456-9980 or complete our online contact form to reach us!

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