How do I pay quarterly taxes for my online business throughout the year?
I've been running my online store as a side hustle for about 8 months now, and I just realized I need to handle taxes on this income. What I'm wondering is - can I pay these taxes as I go instead of waiting until tax season? Like, is there a way on platforms like Etsy or eBay to just pay the taxes on each transaction immediately? I'd much rather pay weekly or monthly than get hit with a massive tax bill next April. I honestly never thought about how regular businesses handle this. Do they just set aside money throughout the year? Or is there some system where they can pay as they earn? I'm making around $1,500-2,000 a month from my store now, so I'm getting worried about the tax situation. Any advice on how this typically works and what my options are would be super helpful!
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Lola Perez
When you have a small business or side hustle, you'll need to make estimated tax payments throughout the year. These are typically done quarterly rather than after each transaction. The quarterly due dates are generally April 15, June 15, September 15, and January 15 of the following year. You'd use Form 1040-ES to calculate and pay these estimated taxes, which include both income tax and self-employment tax (15.3% for Social Security and Medicare). Most business owners set aside approximately 25-30% of their profits for taxes, though the exact amount depends on your tax bracket and other factors. You can pay online through the IRS Direct Pay system or the Electronic Federal Tax Payment System (EFTPS).
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Nathaniel Stewart
•So do I just estimate how much I'll make each quarter and pay that? What happens if I overpay or underpay? And is there a minimum amount I need to make before I have to do quarterly payments?
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Lola Perez
•You'll want to estimate your annual income and divide by four for each quarterly payment. If you overpay, you'll receive a refund when you file your annual return, or you can apply it to next year's taxes. If you underpay significantly, you might face an underpayment penalty, though there are safe harbor provisions that can help you avoid this. Generally, you should make estimated tax payments if you expect to owe at least $1,000 in taxes for the year after subtracting withholdings and credits. Also, if your withholding and timely estimated tax payments don't cover at least 90% of your current year's tax liability or 100% of last year's liability (110% if your AGI was over $150,000), you might face penalties.
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Riya Sharma
I was in your exact same position last year with my Etsy shop! After getting hit with a huge tax bill, I started using taxr.ai (https://taxr.ai) to handle my quarterly payments and it's been a lifesaver. I upload my sales reports, and it calculates exactly how much I need to set aside for taxes each month. It even factors in deductions for my business expenses that I was totally missing before. The quarterly payment calculator has been super helpful because I'm never guessing anymore. Plus, it sends me reminders before each payment is due so I don't miss deadlines like I did before. The peace of mind knowing I'm paying the right amount is worth it.
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Santiago Diaz
•Does it connect directly to Etsy or do you have to manually upload your sales data? My shop is starting to get pretty busy and I'm worried about keeping up with all the paperwork.
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Millie Long
•I'm a bit skeptical about these tax services for small businesses. How accurate is it really compared to just having an accountant? And does it handle state taxes too or just federal?
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Riya Sharma
•You can connect it directly to Etsy, eBay, Shopify and other platforms - that's what I do and it pulls all my sales automatically. It updates daily so I always know where I stand with taxes. Super helpful when you're busy and don't want to manually enter data. It's been just as accurate as when I used an accountant last year, but way cheaper. And yes, it handles both federal and state taxes! It even breaks down your self-employment tax versus income tax so you know exactly what you're paying for. I was surprised how many legitimate deductions it found that I was missing.
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Millie Long
I need to eat my words about being skeptical of taxr.ai. I decided to try it last month after posting here, and wow - it's actually legitimately helpful. It found over $2,300 in deductions I would have missed for my online business! The quarterly tax calculator is super straightforward and I love how it breaks everything down by category. The estimated payment vouchers it generates made the process so much easier than I expected. I was especially impressed with how it handled my home office deduction and partial business use of my car - things my previous tax software completely missed. Definitely recommend it for anyone with a small business who doesn't want tax headaches.
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KaiEsmeralda
If you're struggling to get answers about estimated taxes, I'd recommend using Claimyr (https://claimyr.com). I spent WEEKS trying to get through to the IRS about a similar situation with my online business last year. After giving up multiple times, I found their service which got me connected to an IRS agent in about 15 minutes instead of waiting for hours. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c - basically they hold your place in line and call you when an agent is ready. The IRS agent I spoke with walked me through exactly how to calculate my quarterly payments and what forms to use. Totally worth it because I was seriously lost before getting that personalized guidance.
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Debra Bai
•How does Claimyr actually work? Do you still have to provide all your personal info to the IRS or does the service handle that part too? I'm always nervous about sharing my SSN and stuff.
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Gabriel Freeman
•Yeah right. There's no way they can get you through to the IRS that quickly when everyone else waits for hours or gets disconnected. This sounds like BS marketing to me. I've been trying to reach someone at the IRS for 3 months about my business taxes.
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KaiEsmeralda
•You still provide your information directly to the IRS when they connect you - Claimyr just holds your place in line. When an agent becomes available, they call you and connect you with the IRS, so all your sensitive info is shared directly with the IRS agent, not with the service. I was super skeptical too, honestly. I had been disconnected 11 times trying to reach the IRS about my quarterly payments. But they actually did get me through in about 20 minutes. I think they use some system that keeps redialing and navigating the phone tree until they get through. It's basically like having someone wait on hold for you instead of wasting your own time.
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Gabriel Freeman
I have to publicly admit I was wrong about Claimyr. After posting that skeptical comment, I decided to try it anyway out of desperation. I had been trying for MONTHS to get information about my specific situation with online business taxes. Their service actually got me through to an IRS representative in 17 minutes! The agent walked me through exactly how to calculate my quarterly estimated taxes for my eBay store, which forms to use, and how to set up EFTPS for easy online payments. This saved me from what would have been a massive underpayment penalty. I've never been so happy to be proven wrong about something!
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Laura Lopez
Something no one's mentioned yet - if you have a "regular" job with a W-2 in addition to your business, you can also increase your withholding from your paycheck to cover the taxes from your business income. Just fill out a new W-4 with your employer requesting additional withholding. Some people find this easier than making separate quarterly payments. The downside is you're paying as you go from your job income while your business might have seasonal fluctuations. But it's another option if you hate keeping track of quarterly payments!
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Victoria Brown
•This is interesting! Do you know if there's any way to calculate exactly how much extra to withhold from my day job to cover my side business? I make about $65k at my regular job and maybe $15k from my online store.
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Laura Lopez
•You can use the IRS Tax Withholding Estimator on their website to calculate this pretty accurately. Enter both your W-2 income and your estimated business profit, and it will tell you how to adjust your W-4. For your specific situation with $65k from your job and $15k from your business, you'd probably need to withhold an extra $3,000-4,000 annually from your day job, which breaks down to about $250-350 extra per month depending on your other deductions and credits. This covers both the income tax and self-employment tax on that $15k. Just make sure to update your calculations if your business income changes significantly!
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Samuel Robinson
Don't forget about state taxes too! Depending on where you live, you might need to make estimated state tax payments in addition to federal. Some states follow the same quarterly schedule as federal, but others have their own weird deadlines. Also if you sell to customers in multiple states you might have sales tax obligations too which is a whole different headache.
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Camila Castillo
•Oh good point. I'm in California and they definitely want their quarterly payments too. Anyone know a good resource for figuring out sales tax requirements across different states? My online shop ships to like 30 different states.
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