Self-employed and totally confused about estimated tax payments - help please!

Thanks for the info! So I'm already behind on payments since I started 4 months ago? Also, how do I actually make these payments? Is there a website or do I mail checks somewhere?

Yes, you're likely behind on the schedule, but don't panic! If you just started 4 months ago, you would have missed some quarterly deadlines, but the penalties are calculated based on how much you underpaid and for how long, so they shouldn't be too severe if you start making payments now. For making payments, the easiest way is through the IRS Direct Pay system on irs.gov or the IRS2Go app. You can pay electronically with no fee. Alternatively, you can mail payment vouchers from Form 1040-ES with checks to the address listed in the form instructions, but electronic payment is faster and gives you immediate confirmation.

Does it handle multiple income streams? I do freelance coding but also have some rental income and a part-time W-2 job. Would this work for my situation or is it just for single-business people?

I'm a bit skeptical about these tax tools. How accurate is it really? I've tried other tax calculators that gave me wildly different numbers. Does it actually take into account state taxes too? I'm in California and state taxes are almost as complicated as federal.

Yes, it handles multiple income streams very well! I actually have my main business plus some side consulting, and it keeps everything organized separately but calculates the total tax obligation correctly. You can upload both your freelance records and W-2 information, and it factors everything in together. It's extremely accurate in my experience. Unlike basic calculators, it uses actual tax code logic rather than simple percentages. And yes, it definitely handles state taxes - including California! I'm in New York which has its own complexity, and it correctly calculated both my state and city tax obligations. The estimates were within $120 of what I actually ended up owing at tax time.

Wait, I'm confused. How does this actually work? The IRS phone system is notoriously impossible to get through - how can a third party service possibly get you through faster? Sounds too good to be true.

Yeah right. No way this actually works. I've been trying to talk to someone at the IRS about my estimated tax situation for months. If there was a magic solution, everyone would be using it. $20 says you wait just as long.

It works by navigating the complex IRS phone system using their proprietary technology. They essentially find the most efficient pathways through the phone tree and hold times that would normally take hours. It's similar to how airlines use systems to find routing efficiencies that normal travelers can't access. I was super skeptical too! I figured it was worth trying since my alternative was spending another day on hold. The difference is they have data on call volumes, wait patterns, and optimal times. I went from never reaching a human to having a 22-minute conversation with an IRS agent who answered all my questions about my specific estimated tax situation. It saved me a 45% penalty on my first two missed quarterly payments because I was able to fix the issue promptly.

Is 30% enough though? I've heard some people say you should set aside up to 40% depending on your state. What state are you in? And do you find you usually have extra left over at the end of the year?

I'm in Tennessee which has no state income tax, so 30% works perfectly for me. You're right that if you're in a high-tax state like California or New York, you might want to bump that up to 35-40%. I typically do have some extra left over at the end of the year, which I use to either reinvest in my business or take as a little "bonus." Having that buffer is actually nice because it means I never stress about underpaying. I'd rather have that peace of mind and a small refund than cut it too close and owe penalties.

I used it last year and honestly found it disappointing for quarterly payments. It's decent for annual filing, but the quarterly tool was basic and didn't save me much time. Plus it didn't sync well with my bank accounts. I switched to QuickBooks Self-Employed which is much better for tracking throughout the year and calculating quarterly payments accurately.

Thanks for the honest review! That's really helpful. Maybe I'll look into QuickBooks Self-Employed instead. I'm not doing anything super complicated tax-wise but just want something reliable that won't make me do all the math myself every quarter.

That's really helpful to know! So if this is my first year being self-employed, would I use my tax liability from last year when I was a W-2 employee as the safe harbor amount?

Exactly! Even though your situation has changed, you can use your total tax liability from last year's return (the total tax, not just what you owed at filing time) as your safe harbor amount. Divide that by 4 and pay that amount each quarter, and you'll be penalty-proof even if your self-employment income is significantly higher. Just remember that while this protects you from penalties, you'll still need to pay any additional tax you owe when you file your return. But at least you won't have those nasty underpayment penalties added on top!