ray613•6d ago

I used to think quarterly estimated tax payments were a waste, but now I see the point

I've been freelancing as a graphic designer for about 8 years now, and I always just paid my taxes once a year in April. It felt like extra work to send money to the IRS every three months, especially when my income varied a lot from month to month. But last year I had a really good quarter in March, made about $14,000, and then a slow summer where I barely cleared $3,000 total. When I filed in April this year, I owed almost $5,000 in penalties and interest because I hadn't paid enough during the year. My accountant showed me the math on the penalty form, and it was hard to argue with. Now I've set up automatic quarterly payments through the IRS website, and it takes maybe 15 minutes every three months. The peace of mind is worth it, and I'm not getting those surprise bills anymore. Has anyone else found a good system for estimating their quarterly payments when income swings up and down?

3 comments

3 Comments

kai8395d ago

I did something similar with my accountant last year. I had a $3,200 penalty for underpayment in 2023 and it stung. What worked for me is using Safe Harbor rules, where I pay 100% of what I owed the previous year in four equal chunks year. It covers me even if my income jumps up like crazy. Hey @bell.jessica, I get why it seems obvious looking back, but when you're in the middle of it and income is all over the place, it's easy to let it slip.

bell.jessica5d ago

Wait, you seriously think paying $5,000 in penalties is less hassle than logging into a website four times a year? That's wild lmao.

evan_grant706d ago

Oh man, I gotta say I still think quarterly payments are kind of a scam for most freelancers. Like you can just set aside 30% in a separate savings account and pay it all in April, same result without the hassle of logging into the IRS site four times a year.

-1