If you are self-employed, a freelancer, or a small business owner in NYC, you've likely heard the term "quarterly estimated taxes." But what are they, and why are they so important?
Unlike a W-2 employee, who has taxes automatically withheld from every paycheck, you are responsible for paying your own taxes directly to the IRS and New York State.
Quarterly estimated taxes are the "pay-as-you-go" system designed to do just that. Failure to pay them (or paying too little) can result in a massive surprise tax bill and costly underpayment penalties.
Here’s what you need to know.
What Exactly Are Estimated Taxes?
Estimated taxes are payments you make throughout the year to cover your tax liability. These payments aren't just for your income tax; they must also cover:
Self-Employment Tax: This includes your contributions to Social Security and Medicare (which an employer would normally pay half of).
Federal Income Tax
New York State & City Income Tax
By paying these in four installments, you ensure you are staying compliant and budgeting your cash flow effectively, rather than facing one unmanageable bill in April.
Who Must Pay Estimated Taxes?
As a general rule, you must pay quarterly estimated taxes if you expect to owe at least $1,000 in federal tax for the year. This applies to most:
Sole proprietors
Partners
S-Corp shareholders
Freelancers and independent contractors
Gig economy workers (Uber, DoorDash, etc.)
Why Is Paying Quarterly a "Must"?
We mentioned it in our social media posts, but it's critical to understand:
Avoid Penalties: Both the IRS and NYS can charge you penalties if you don't pay enough tax throughout the year, even if you pay your full bill in April.
No April Surprise: It prevents the horrible "I owe $15,000!" heart-attack moment when you file your annual return.
Better Cash Flow: It is significantly easier for a small business to budget for four smaller, predictable payments than one large, disruptive one.
2025-2026 Estimated Tax Deadlines
Mark your calendar! The payments are due on the following dates (for income earned in that period):
1st Quarter (Jan 1 – Mar 31): April 15
2nd Quarter (Apr 1 – May 31): June 15
3rd Quarter (June 1 – Aug 31): September 15
4th Quarter (Sept 1 – Dec 31): January 15 (of the next year)
How Do I Know How Much to Pay?
Calculating the correct amount can be tricky, as you have to project your annual income and deductions. If your income is steady, you can often use your previous year's tax return as a guide (this is known as the "safe harbor" rule).
However, if your income fluctuates—as it does for many freelancers and new businesses—you may need to adjust your payments each quarter.
Let's Get You on Track
Feeling overwhelmed? You don't have to handle this alone. Calculating quarterly payments is a core part of our service for NYC small business owners. We can ensure you are compliant, avoid penalties, and keep your finances organized.
Don't wait for a surprise tax bill. Contact Ada Tax Solutions today for a consultation and let's get you on track.
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