Estimated Quarterly Taxes: What Are They & Do I Need To Pay?

If you’re an independent contractor, freelancer, or self-employed business owner, taxes probably feel a little different than they did when you had a traditional paycheck. No employer withholding. No automatic deductions. It can be confusing to know how to prepare for tax time when you’re shouldering this extra responsibility. 

That’s where estimated quarterly taxes come in. While they may sound intimidating, they’re actually one of the best tools you have to avoid surprises and feel more confident as an independent contractor when tax season rolls around.

Let’s explore what estimated quarterly taxes are, and how they can help you plan.

What Are Estimated Quarterly Taxes?

Estimated quarterly taxes are payments you make throughout the year to cover your federal (and sometimes state) income taxes when taxes aren’t automatically withheld from your pay.

Instead of paying one big tax bill in April, the IRS expects self-employed individuals to pay taxes as they earn income. These payments typically cover:

• Federal income tax
  
  
• Self-employment tax (Social Security + Medicare)
  
  
• State income tax (if applicable)
  
  

Payments are usually due four times a year:

• April
  
  
• June
  
  
• September
  
  
• January (of the following year)
  
  

Do I Need to Pay Estimated Quarterly Taxes?

You likely need to make estimated tax payments if you expect to owe $1,000 or more in taxes for the year and no one is withholding taxes from your paychecks. In other words, you fit into one of these categories:

• You are a freelancer, independent contractor, or gig worker, or
  
  
• You’re self-employed or run a small business
  
  

Why Estimated Quarterly Taxes Matter

Quarterly taxes aren’t just an IRS requirement—they’re a powerful planning tool for independent contractors. When used correctly, they can make your finances more predictable, your stress levels lower, and tax season far less intimidating. Here are four benefits of filing quarterly taxes:

1. They Prevent a Huge, Unexpected Tax Bill

One of the biggest shocks for new freelancers is realizing how much they owe at the end of the year. Without taxes being automatically withheld, it’s easy to spend income that technically isn’t all yours.

Estimated quarterly payments break your annual tax obligation into smaller, manageable pieces. Instead of facing a large lump-sum bill in April, you’re paying as you go. This makes cash flow easier to manage and prevents the panic that comes with realizing you owe thousands of dollars all at once.

2. They Can Help You Avoid IRS Penalties and Interest

The IRS operates on a “pay as you earn” system. If you wait until tax season to pay everything, the IRS may consider that an underpayment—even if you pay the full amount later.

Making estimated payments helps you:

• Stay compliant with IRS rules
  
  
• Avoid underpayment penalties
  
  
• Reduce interest charges on unpaid taxes
  
  

While penalties are often relatively small, they’re completely avoidable. Making quarterly payments can help protect you from paying unnecessary fees.

3. They Encourage Better Financial Tracking and Organization

Quarterly taxes force you to check in with your business finances regularly. To estimate what you owe, you need to know:

• How much income you’ve earned
  
  
• What expenses you can deduct
  
  
• What your profit actually is
  

That regular check-in leads to better bookkeeping habits, clearer records, and fewer headaches when tax season arrives. Instead of scrambling to find receipts or reconstruct months of income, you’re staying organized all year long. As a bonus, understanding your numbers helps you make smarter business decisions—not just tax decisions.

4. They Make Tax Time Predictable and Less Stressful

When you pay estimated taxes consistently, April becomes a reconciliation instead of a reckoning. You’re no longer asking yourself if you’ll owe more than you expect; you already know where you stand. You may owe a small amount or receive a refund, but either way, you’ve removed the uncertainty from the process.

For independent contractors, that predictability is everything. It turns taxes from a once-a-year crisis into a routine part of running your business.

How to Calculate Estimated Quarterly Taxes

There’s no one-size-fits-all approach, but here are common ways to calculate your quarterly taxes.

Option 1: Use Last Year’s Taxes

Many people base payments on last year’s total tax bill (divided by four), especially if income is fairly stable.

Option 2: Estimate Current-Year Income

If your income changes often, estimate:

• Expected annual income
  
  
• Business expenses
  
  
• Applicable tax rate

A common rule of thumb for independent contractors is to set aside 25–30% of your net income for taxes.

Option 3: Use IRS Tools or a Tax Pro

The IRS provides Form 1040-ES, and tax software or professionals can help you calculate more precise payments.

Note: Many contractors also open a separate savings account just for taxes, transferring money as they earn it, which can help you stay on track. 

Using Estimated Quarterly Taxes to Simplify Tax Time 

Estimated quarterly taxes may not be glamorous—but they can help you independent contractors avoid financial surprises and feel more confident at tax time. Once you get into the rhythm, quarterly taxes stop feeling like a burden and start feeling like a system that supports your overall financial wellbeing. 

Want another way to simplify tax season? As part of Branch Rewards, TurboTax is offering $5 cash back* (minimum $25 spend) when you use your Branch Card** at checkout. When you’re ready to file, you can set up your direct deposit with Branch to get your refund quicker than a check.*** Learn more!

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