Table of Contents
Self-employed individuals are responsible for paying their own taxes, including Social Security and Medicare taxes, collectively known as self-employment taxes. To manage these obligations, they often make quarterly estimated payments to the IRS. Understanding how these taxes and payments work can help avoid penalties and ensure compliance.
What Are Self-Employment Taxes?
Self-employment taxes consist of Social Security and Medicare taxes that are usually withheld from employee wages. Since self-employed individuals do not have an employer to withhold these taxes, they must calculate and pay them directly to the IRS. The current rate is 15.3% on net earnings.
Quarterly Estimated Payments
Self-employed persons are required to make estimated tax payments four times a year. These payments cover income tax and self-employment tax liabilities. Making timely payments helps avoid penalties and interest for underpayment.
How to Calculate Payments
To determine the amount of quarterly payments, estimate your expected net earnings for the year. Use IRS Form 1040-ES to calculate and submit payments based on these estimates. It is advisable to review and adjust payments if income fluctuates during the year.
Important Deadlines
- April 15 for the first quarter
- June 15 for the second quarter
- September 15 for the third quarter
- January 15 of the following year for the fourth quarter