Estimated Taxes
Quarterly tax payments made by self-employed individuals and businesses.
Estimated taxes are periodic payments made to the IRS (and often state agencies) by individuals and businesses that don't have taxes withheld from income—self-employed workers, freelancers, and business owners. Payments are due April 15, June 15, September 15, and January 15. Underpayment can trigger penalties even if you pay the full balance at filing.
Example
A freelance graphic designer earning $120,000 annually makes four quarterly estimated payments of approximately $8,500 each to cover federal income and self-employment taxes.
Why It Matters for Your Business
Missing or underpaying estimated taxes triggers IRS penalties, so calculating and paying on schedule prevents surprise bills and fines at filing time.
Practical Tips
- •Use the safe harbor rule: pay at least 100% of last year's tax liability (110% if AGI exceeds $150,000) to avoid penalties.
- •Set aside 25–30% of each payment received for taxes in a separate savings account.
Related Terms
More Taxes Terms
Adjusted Gross Income
Gross income minus specific deductions like retirement contributions.
Tax Audit
An examination of tax returns by the IRS to verify accuracy.
Capital Gains
Profit from selling an asset for more than its purchase price.
Capital Loss
Loss from selling an asset for less than its purchase price.
Tax Deduction
An expense that reduces taxable income.
Related Financial Guides & Resources
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