Being self-employed comes with a number of challenges — including estimated taxes. Luckily, our quarterly tax calculator takes the guesswork out of a complicated task.
How does this quarterly tax calculator work?
Starting with a few simple inputs, this calculator provides a ballpark estimate for your quarterly tax bill. Let’s look over the key inputs to better understand exactly what goes into the results.
What information you'll enter
📍 Where you live
This helps the calculator figure out which state tax rates it needs to determine your state tax bill. Be sure to use the state that you’ll be paying taxes to.
For example, if you worked in California all year, but are in the process of moving to Arizona, your state input would be “California.”
That’s because your income up till now was sourced in California.
💰 Net self-employment income
“Self-employment” refers to any type of 1099 work. This could mean working as a freelancer, independent contractor, gig worker, or running a small business. If you receive a Form 1099 instead of a W-2 from your employer, you count as a 1099 worker.
Note that this box says “net” income. That means your income after you subtract your business write-offs.
For example, if you drive for Uber, it would be all of your earnings minus everything you spent on rideshare throughout the year. That might include part of:
- Gas fill-ups
- Car maintenance
- Vehicle depreciation
- Rideshare insurance
- Your phone bill
- The Spotify account you use to play music for passengers
Not sure what your business write-offs are? Download the Keeper app and find out!
💸 W-2 income
This box is optional, but if you had W-2 earnings, you can put them in here.
Unlike your 1099 income, be sure to input your gross wages. Meaning, your pay before taxes and other payroll deductions are taken out.
Let’s say you have a job that pays $20 per hour, but after taxes and retirement contributions, your “take-home pay” is only $14 per hour. For this calculation to work, you need to enter the $20 per hour rate. (I’ll explain why in a minute!)
👪 Tax filing status
If you’ve filed taxes before, you’re probably familiar with these statuses. The options are:
- 🙍♂️ Single
- 👫 Married filing jointly
- 👨👦 Head of household
Married individuals filing separately will use “single.”
Your filing status affects your tax brackets and standard deduction amount, so it’s a key factor in the accuracy of this estimate.
What the calculator does automatically
Once you put in your info, the calculator will estimate your quarterly tax bill with a little bit of automatic tax magic. Here’s what it’s doing in the background:
🛡️ Calculating your standard deduction
The standard deduction shields a portion of your earnings from income tax. You can take this tax break and still write off your business expenses on top.
The amount of your standard deduction depends on your filing status. For 2022, those figures are:
- 🙍♂️ Single: $12,950
- 👫 Married filing jointly: $25,900
- 👨👦 Heads of household: $19,400
For example, if you’re single and earn $30,000 a year, you’ll pay income tax on $17,050 (30,000 - 12,950).
The standard deduction is supposed to represent the amount of money it takes to maintain a basic standard of living. Interestingly, the amount for a single filer isn’t too much higher than the current poverty line — $12,760.
💲 Accounting for your QBI deduction
The qualified business income deduction gives anyone with self-employment income a bonus write-off. It’s worth up to 20% of their income after subtracting business write-offs.
Here’s how it works: If you have $20,000 in 1099 income and $10,000 in business expenses, your net income is $10,000. And your QBI deduction would be $2,000 (10,000 x 0.2).
The $2,000 lowers your overall taxable income, just like the standard deduction does. Unfortunately, it has no effect on your self-employment taxes, only your income taxes.
Unlike the standard deduction, there are limitations for the QBI deduction. Our calculator accounts for these, but it’s not able to handle all scenarios.
Generally speaking though, most 1099 workers will receive 20% if they have leftover business income.
👔 Estimating tax withholding from your W-2 income
If the calculator results show a negative number, or an amount less than you were expecting, you most likely put in W-2 income as well.
Our calculator uses the IRS standard withholding rates to estimate what’s withheld from your paycheck annually. These rates are the default, unless you tell your payroll provider to use a different amount.
The withholding rates are designed to create some margin. They take a little more than you’re forecasted to owe and return the extra as a refund when you file. (From the IRS’s point of view, taxation is easier to enforce when you’re returning money rather than asking for it.)
To help you avoid drastically overpaying in taxes, we include your estimated withholding in the final result. That’s why it’s important to input your gross W-2 wages when using the calculator.
What the calculator doesn’t do: Include tax credits
Most tax credits are based on your particular circ*mstances. For example, maybe you:
- Had a baby
- Went to school
- Saved for retirement
We would have to ask a lot more questions to accurately forecast your tax credits. To make this calculator quick and easy to use, we’ve chosen not to include them in our results.
How to check which tax credits you qualify for
If you’re not sure whether these credits apply to you, you can check by looking at your tax return from last year. The second page of your Form 1040 will list the credits you received for the year:
To find more information about the amounts listed on line 31, look at your Schedule 3, which should be included with your tax return.
If you were eligible for a tax credit last year, you’ll often be eligible again this year (although that’s not always the case).
What happens if you’re eligible for tax credits
Being eligible for tax credits could mean that, if you make the estimated payments recommended by the calculator, you’ll end up overpaying in taxes.
If that happens, you’ll get the extra money back in a refund.
Why should you make quarterly tax payments?
There are a few reasons why making quarterly tax payments is a good idea. Of course, not everyone is required to. You can skip the process altogether if any of these three apply:
- ⬇️ You expect to owe less than $1,000
- 🗓️ You didn’t owe tax last year
- 🧮 You’re able to increase your W-2 withholding to cover your 1099 taxes
For everyone else, let’s look at why this process is a good idea:
🚔 Penalty avoidance
This is the main reason to stay on top of your tax payments. Our tax system is based on a pay-as-you-go rule. That means taxes are due when you earn the income, not when your tax return is due.
If you don’t pay in throughout the year, you’ll likely get hit with an underpayment penalty. This penalty is equal to 0.05% of your tax due, every month that it remains unpaid.
While that might not seem like much, it can add up quickly. The best way to save your hard-earned dollars is to pay your taxes once a quarter when they’re due.
🧘 Peace of mind
While paying taxes is never fun, it comes with a greater sense of control heading into tax season. You don’t have to be concerned about a surprise bill because you’ve been managing your payments throughout the year.
For 1099 workers who already have a lot of stress on their plates, this approach can make a huge difference.
📊 Improved financial focus
An important step to doing quarterly taxes is finding your “net income.” This forces you to review your business's financial health beyond just your bank balance.
To pay quarterly, you’ll have to know:
- How much money you’ve earned so far
- How much money you expect to earn for the whole year
- Your work expenses so far
- A good forecast for what your work expenses will be for the current year
Knowing all this forces you to engage with the financial side of your business. Having a quarterly reason to study your income and expenses sharpens your financial focus and improves your managerial skills.
Pro tip: To save time sorting your expenses, consider downloading the Keeper app! We can automatically scan your bank and credit card transactions and find all your eligible write-offs for you.
How to pay your quarterly taxes
Now that you know how much to pay and why, let’s look at how to make the rubber meet the road. There are five ways to make estimated tax payments on your 1099 income:
💳 Option #1: Direct Pay
The IRS Direct Pay option doesn’t require you to set up an account or register in any way. You can simply:
- Input your tax details
- Make a payment
This is easiest to do with direct deposit, but the IRS can also work with third-party merchants to handle credit card payments.
Option #2: 💻 An EFTPS account
You’ll need to set up an account to use this payment method, but I recommend all taxpayers do that at some point anyway. It’s the only way to easily view your tax records and transcripts. It also lets you conveniently make tax payments.
To enroll, visit the IRS’s Electronic Federal Tax Payment System (EFTPS). Once registered, you’ll be able to view all your tax return filings and can seamlessly make estimated payments.
📱Option #3: Mobile app
Believe it or not, the IRS recently released a mobile app for taxpayers called IRS2Go. It’s available in both English and Spanish, and you can use it to make payments and track your refund from your phone.
This is a good direction for the IRS, but be prepared for some glitching and long wait times with customer support. The app is far from a walk in the park, but hopefully the functionality will improve over time.
📞 Option #4: Phone payments
Over the phone is another secure way to make your quarterly payments.
The IRS works with third-party payment networks to handle these. So instead of calling the IRS directly, you’ll actually call one of the following providers:
Note: if you’ve created an EFTPS account, you can call the IRS directly at:
- 1-800-555-4477 (English)
- 1-800-244-4829 (Español)
- 1-800-733-4829 (Deaf/hard of hearing)
✉️ Option #5: Check payments
Many people still prefer physical checks, and those are accepted as well. However, due to security concerns around paper mail, the IRS strongly encourages people to make electronic payments whenever possible.
If you plan to use a check, be sure to follow the steps below:
- Fill out your 1040-ES (pages 9-11)
- Make your check payable to the “United States Treasury”
- Write your social security number or ITIN on the check
- Write “2022 1040-ES” on your check (or whatever tax year the check is for)
- Mail both the check and the 1040-ES together without stapling them
Pro tip: Make sure your payment amount is written correctly on the check. The IRS doesn’t want you to use dashes or lines:
- ✅ Correct format: $1,000.00
- ❌ Incorrect format: $1,000–
- ❌ Incorrect format: $1,000 0/100
Where you mail the check depends on your location. Refer to page 5 of the IRS instructions to find the correct address.
📂 Option #6: Increase your W-2 withholding
Last but not least, if you work a W-2 job in addition to your freelance work, ask your employer to increase your withholding. This saves you from having to submit payments yourself.
For example, if the results from this calculator tell you to pay $1,200 quarterly, have your employer increase your withholding by $200 on your biweekly payroll. This results in the same amount of money being set aside, without you having to do anything.
And with that, you’re off to the races! Be sure to visit Keeper’s Free Resources page for more tips and free tools, or download our app so that we’re never further than a click away.
