Quarterly Estimates

I have just begun my freelance editing career and I truly have no idea how much money I will make this year. What's the best way to handle this quarterly estimate tax payment?

  • Hi Christian,

    We are a CPA firm specializing in freelancers and small business. a few options:
    1) don't pay them and then pay interest on tax day on the underpayment - no penalty, just interest.
    2) estimate the amount you might owe - generally around 25-35% depending on where you live and your profit. then cross your fingers.
    3) pay based on 2015 taxes but probable not a good idea if new to freelancing and 2016 taxes will be nothing like 2015 taxes.
    4) Crunch numbers every quarter to see how much you owe - obviously takes some real work often handled by your CPA.

    I am happy to potential work with you to get into more of the details if you would like. You can email me at Howard@cpasamuels.com.

    good luck!

  • In extension of/to preface what Howard said, when you say started freelancing:
    1. What were you doing before this? Still copy writing? For a company?
    2. Do you anticipate 2016 income to be less or more than 2015?
    3. What state do you live in?
    4. What states have you worked in or will work in during 2016?

    You (and your spouse if applicable) are required to pay the lesser of 25% of your 2016 tax or 2015 tax by April 18th. But since you don't know what 2016 will look like, you have to semi-project/budget/forecast. You determine how much you earned during the first 3/4 months and if you have contracts/projects signed for the year of the year, add those in, to calc your projected 2016 income would be. If you will earn more in 2016, then you just take 25% of your 2015 taxes for Q1.

    5. If you have payroll/wages as well as freelancing, it's possible you may want to just change your withholdings there to cover your freelance tax.

    Lots of things to think about.

    But I definitely think you may want to consult with a CPA or another tax preparer (not all CPA are tax preparers and a professional tax preparer need not be in a CPA). I'm a CPA but Howard is one as well, and there are a few other tax professionals on here and you may already have one you're working with. I won't "advertise" myself. If you want to work with me, you can reach me through here. =) But you may want to get ahold of someone quick. If you wait til the last minute, they might be less nice.

  • Hi Christian,

    We are a CPA firm specializing in freelancers and small business. a few options:
    1) don't pay them and then pay interest on tax day on the underpayment - no penalty, just interest.
    2) estimate the amount you might owe - generally around 25-35% depending on where you live and your profit. then cross your fingers.
    3) pay based on 2015 taxes but probable not a good idea if new to freelancing and 2016 taxes will be nothing like 2015 taxes.
    4) Crunch numbers every quarter to see how much you owe - obviously takes some real work often handled by your CPA.

    I am happy to potential work with you to get into more of the details if you would like. You can email me at Howard@cpasamuels.com.

    good luck!

  • In extension of/to preface what Howard said, when you say started freelancing:
    1. What were you doing before this? Still copy writing? For a company?
    2. Do you anticipate 2016 income to be less or more than 2015?
    3. What state do you live in?
    4. What states have you worked in or will work in during 2016?

    You (and your spouse if applicable) are required to pay the lesser of 25% of your 2016 tax or 2015 tax by April 18th. But since you don't know what 2016 will look like, you have to semi-project/budget/forecast. You determine how much you earned during the first 3/4 months and if you have contracts/projects signed for the year of the year, add those in, to calc your projected 2016 income would be. If you will earn more in 2016, then you just take 25% of your 2015 taxes for Q1.

    5. If you have payroll/wages as well as freelancing, it's possible you may want to just change your withholdings there to cover your freelance tax.

    Lots of things to think about.

    But I definitely think you may want to consult with a CPA or another tax preparer (not all CPA are tax preparers and a professional tax preparer need not be in a CPA). I'm a CPA but Howard is one as well, and there are a few other tax professionals on here and you may already have one you're working with. I won't "advertise" myself. If you want to work with me, you can reach me through here. =) But you may want to get ahold of someone quick. If you wait til the last minute, they might be less nice.