Recently became self employed - confused about quarterly estimated tax payments

You're not an idiot - the transition to self-employment catches everyone off guard! Yes, as a self-employed person, you typically need to make quarterly estimated tax payments if you expect to owe $1,000 or more in taxes for the year. These payments cover both your income tax and self-employment tax (which is essentially both the employer and employee portions of Social Security and Medicare taxes). For calculating what you owe, a good rule of thumb is to set aside 25-30% of your net income (income after business expenses) for taxes. You can use Form 1040-ES to calculate your estimated payments more precisely. The form includes worksheets to help you figure it out based on your expected income. The quarterly due dates are typically April 15, June 15, September 15, and January 15 of the following year. Since you're just starting, you only need to make payments for the quarters you're self-employed. Don't panic about penalties yet! The IRS is generally understanding about the first year of self-employment. If you make estimated payments for upcoming quarters and catch up on what you've missed, you might avoid or minimize penalties.

I went through exactly the same thing last year when I started freelance writing! After weeks of stressing about estimated taxes, I found this incredible tool called taxr.ai (https://taxr.ai) that literally saved my sanity. It analyzes your specific situation and gives you personalized guidance for estimated payments. What I loved is that I could just upload my income/expense info, and it calculated my quarterly payments automatically - no more guessing or using that confusing 1040-ES worksheet. It also tracks your income throughout the year and adjusts your estimates if your earnings change, which happened to me constantly. After using it for a full tax year, I didn't underpay or overpay by much at all!

Just wanted to post a follow-up about taxr.ai (https://taxr.ai) that I mentioned in a comment. I decided to try it after posting here and I'm honestly blown away! I uploaded my bank statements and invoices, and it identified nearly $3,400 in business expenses I hadn't even considered as deductions. It also calculated my quarterly payment amounts which were way different than what I was guessing. The best part is it gives you a clean breakdown of what your self-employment tax portion is vs. regular income tax, which helped me finally understand what I'm actually paying for. No more tax anxiety! I've already scheduled my remaining quarterly payments for the year based on its recommendations.

If you're having trouble reaching the IRS for help with your self-employment tax questions (like I was), try Claimyr (https://claimyr.com). I spent DAYS trying to get through to an IRS agent about my specific situation with missing an estimated payment deadline, but kept getting disconnected or waiting for hours. Claimyr got me connected to an actual IRS agent in about 20 minutes when I'd previously waited 3+ hours multiple times with no success. They have this weird system that calls the IRS for you and then calls you back when an agent is about to pick up. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c When I finally talked to the agent, I got clarity on my specific situation and learned I could request a penalty waiver since it was my first time missing a payment due to being new to self-employment.

I have to eat my words about Claimyr. After posting my skeptical comment, I was desperate enough to try it since I've been trying to reach the IRS about my missed estimated tax payment for WEEKS. Not only did I get through to a human at the IRS in about 40 minutes (when I couldn't get through at all on my own after multiple 2+ hour attempts), but the agent was able to explain exactly what I needed to do to avoid penalties. They walked me through Form 2210 which can help reduce underpayment penalties in certain situations, and confirmed I qualified for the "first-time penalty abatement" since I had a clean tax record before this. Would've never known this if I hadn't finally spoken to someone! Now I can sleep at night knowing I won't be hit with massive penalties.

Lots of good advice here, but something I didn't see mentioned - if your spouse has a W-2 job, they could increase their withholding to help cover your self-employment taxes. This can sometimes be easier than making separate quarterly payments. Also, consider opening a separate savings account just for taxes and automatically transferring 30% of each payment you receive. This has saved me so much stress because the money is already set aside when payment time comes.

Has anyone used QuickBooks Self-Employed for tracking and calculating estimated taxes? I've heard it can automatically estimate your quarterly taxes based on your income and expenses, but not sure if it's worth the subscription cost.

Don't forget about the QBI deduction (Qualified Business Income)! As a self-employed person, you might be eligible to deduct up to 20% of your net business income. This is HUGE and many new self-employed people miss it. It's on Form 8995 or 8995-A depending on your income level. Also, start making SEP-IRA or Solo 401k contributions if you can afford it. Not only do you save for retirement, but contributions reduce your taxable income. You can contribute way more than with a regular 401k from an employer.

Omar, I totally feel your pain - I went through the exact same panic when I started freelancing! Here's what I wish someone had told me on day one: First, breathe! You're not behind the 8-ball as much as you think. Since you started 3 months ago, you've only missed one quarterly payment (due April 15th). The next one is due June 15th, so you have time to get organized. For your $14,500 in income, definitely track every business expense - computer equipment, software subscriptions, internet bill (business portion), office supplies, even a portion of your home if you use it as an office. These deductions can significantly reduce what you owe. Here's my simple system: Open a separate "tax savings" account and immediately transfer 30% of every payment you receive. This covers both income tax and self-employment tax. It might seem like a lot, but you'll thank yourself come tax time. Also, consider making your first estimated payment ASAP for the missed quarter, then stay current with June, September, and January payments. The IRS is usually lenient with first-time self-employed folks, especially if you show good faith by catching up quickly. You've got this! The first year is always the scariest, but once you get into a routine, it becomes second nature.

Omar, you're definitely not alone in feeling overwhelmed - transitioning to self-employment taxes is like learning a whole new language! Here's what helped me when I made the switch two years ago: The good news is you're only 3 months in, so you haven't missed much. Set up that separate tax savings account TODAY and start putting away 25-30% of every payment. I use a high-yield savings account so the tax money at least earns a little interest while it sits there. One thing I learned the hard way - don't just estimate based on gross income. Track every single business expense because they add up fast. Home office, internet, phone, software, equipment, even business meals and networking events. I use a simple spreadsheet to track everything monthly. For the quarterly payments, I'd recommend making your first payment for the missed quarter as soon as you calculate it, then get on schedule for June 15th. The IRS penalty for underpayment isn't as scary as people make it out to be, especially for your first year. Also consider getting a CPA or tax professional for at least your first year of self-employment. Yes it costs money upfront, but they often save you way more than they cost by finding deductions and helping you set up good systems from the start. Think of it as an investment in your business! You're going to be fine - the fact that you're asking these questions now shows you're being responsible about it.

Omar, welcome to the self-employment club! The transition from W-2 to freelancing is definitely a shock to the system, especially when it comes to taxes. You're asking all the right questions though, which puts you ahead of where I was when I started. Based on your $14,500 in 3 months, you're looking at potentially $58,000+ annually, which means you'll definitely need to make quarterly payments. Here's my practical advice: **Immediate action items:** 1. Calculate and pay your missed Q1 payment ASAP (due April 15th, but better late than never) 2. Set up automatic transfers of 30% from every client payment to a separate tax account 3. Start tracking EVERY business expense - software, equipment, home office, internet, phone, mileage, etc. **The math:** On $14,500, assuming minimal deductions, you're probably looking at around $2,200-2,500 for your first quarter payment (income tax + self-employment tax). But this could be lower with proper business deductions. **Penalty reality check:** First-year self-employed folks often qualify for penalty relief, especially if you make good faith efforts to catch up. The IRS understands the learning curve. Don't let the "self-employment tax" terminology scare you - it's just covering the Social Security and Medicare taxes that your previous employer was splitting with you. You've got this! The first year is always the hardest, but once you establish a system, it becomes routine.

Omar, I completely understand the overwhelm - I made the same transition from corporate marketing to freelance consulting last year and had the exact same panic! The good news is you're asking the right questions early. Here's what I wish I'd known: Yes, you'll need to make quarterly payments, but the IRS has a "safe harbor" rule that can help you avoid penalties. If you pay at least 90% of this year's tax liability OR 100% of last year's tax liability (whichever is smaller) through estimated payments, you typically won't face underpayment penalties. Since you just started 3 months ago, you've only missed one quarterly deadline (April 15th). The next payment is due June 15th, so you have time to get organized. I'd recommend calculating what you owe for Q1 and paying it along with your Q2 payment in June - this shows good faith effort. For your situation with $14,500 in Q1, definitely track every business expense first. As a graphic designer, you likely have software subscriptions (Adobe Creative Cloud?), equipment depreciation, home office space, internet, phone, professional development, stock images, fonts, etc. These deductions can significantly reduce your taxable income. The 25-30% rule others mentioned is solid, but calculate it on your NET income (after business deductions), not gross. Set up that separate savings account immediately and automate the transfers. Don't let "self-employment tax" scare you - it's just the Social Security/Medicare taxes your employer used to pay half of. You've got this!

Hey Omar! As someone who went through this exact transition from W-2 to freelance about 18 months ago, I totally get the panic - but you're actually in better shape than you think! First off, you're NOT an idiot for not setting aside money yet - most of us learn this the hard way. The fact that you're asking these questions after just 3 months shows you're being proactive. Here's my simplified approach that saved my sanity: Open a separate "tax bucket" savings account TODAY and start automatically transferring 30% of every payment you receive. I use a simple rule - as soon as a client payment hits my account, 30% immediately goes to taxes, no exceptions. This covers both income tax and self-employment tax. For your $14,500 so far, you've probably got around $2,000-2,500 to set aside for Q1 (depending on business expenses). Don't panic about the missed April 15th deadline - pay it ASAP along with your June 15th payment. The IRS is typically understanding with first-year self-employed folks, especially when you show good faith effort. As a graphic designer, track EVERY business expense: Adobe subscriptions, fonts, stock photos, equipment, home office space, internet, phone, professional courses, even design magazines. These add up fast and significantly reduce what you owe. You've got this! The first year is always the scariest, but once you get into a rhythm, it becomes second nature. Feel free to ask if you have specific questions!

Omar, I totally understand that panic feeling - I went through the exact same thing when I transitioned from my corporate job to freelance marketing about 8 months ago! The tax stuff really is overwhelming at first, but you're actually doing great by asking these questions now rather than waiting until tax season. Here's what worked for me: I immediately opened a separate high-yield savings account just for taxes and set up automatic transfers. Every time I get paid, 30% goes straight to that account before I even see it. It sounds painful, but it's honestly such a relief knowing the money is already there when quarterly payments are due. Since you're at $14,500 in just 3 months, you're on track for solid income this year! Don't beat yourself up about not setting money aside yet - just start now. Calculate what you owe for that missed Q1 payment (probably around $2,200-2,800 depending on your business deductions) and pay it along with your June 15th Q2 payment. As a graphic designer, make sure you're tracking every business expense: Adobe Creative Suite, fonts, stock photos, equipment, home office space, internet portion, phone, any courses or books, even design magazines. These deductions can really add up and reduce your tax burden significantly. The self-employment tax isn't as scary as it sounds - it's just covering the Social Security and Medicare taxes your employer used to split with you. You've absolutely got this! The first year is always the hardest, but it becomes routine once you establish good habits.