The January 15 Estimated Tax Payment: A Calm Checklist for Freelancers
A graphic designer finishes a busy year, opens the bank app in early January and sees the balance is higher than ever. Then she remembers that nobody has been taking taxes out of that money. The last estimated payment of the year is due on January 15.
Estimated payments exist for people whose income does not come with withholding. This is a short checklist based on the IRS guidance, so you know what to ask your tax preparer rather than guess.
Do you need to pay estimated tax?
According to the IRS, you generally need to make estimated payments if both of these apply:
- You expect to owe at least $1,000 in tax after subtracting withholding and refundable credits.
- Your withholding and credits will be less than the smaller of 90% of this year's tax or 100% of last year's tax (110% if last year's adjusted gross income was over $150,000).
Paying at least that smaller amount is known as a safe harbor. Whether it applies to you is a question for a tax professional.
The four dates
- Income earned January to March: April 15.
- April and May: June 15.
- June to August: September 15.
- September to December: January 15 of the following year.
If a date falls on a weekend or a legal holiday, the payment is due the next business day.
An example you can check
Say last year's tax came to $8,000 and you choose to pay 100% of that amount in four equal parts. Each payment is $2,000. The number is easy to put in a calendar, and it does not depend on how this year turns out.
A routine that removes the surprise
- Ask your preparer for the amount to pay each quarter.
- Put the four dates in your calendar with a reminder a week before.
- When a client pays, move the agreed share to a separate account the same day.
- Keep a note of each payment you make, since you report them on your return.
The IRS lists the ways to pay, including an online account, Direct Pay from a bank account, by phone and through its app.
The calendar part is something Edwin, a digital assistant, can take off your plate: recurring reminders on the dates you set, plus a weekly recap of what is coming up. He does not give tax advice, he always says he is an AI, and nothing goes out without your approval.