Paying quarterly taxes is one of the biggest things my clients who are self-employed and running their own businesses don’t know they’re supposed to do or aren’t sure how to do. I want to encourage you, you’re not alone in this.

However, let’s get you set up to start doing this. To walk you through it, here’s a three-step guide on how to keep your business in compliance with the IRS and pay your quarterly taxes.

A Guide to Paying Your Quarterly Taxes

The U.S. works on a “pay your taxes as you earn money” system. So, if you're self-employed and run your own business, the IRS expects you to pay your business’s taxes quarterly.

Step 1: Add Quarterly Tax Due Dates to Your Calendar

Quarterly Taxes are usually due to the IRS each year on:

April 15
June 15
September 15
January 15 (of the following year)

Make sure to put these as recurring deadlines on your calendar.

Step 2: Calculate How Much Tax You Owe for the Quarter

How in the world do you know how much tax you owe each quarter?

There's two methods you can choose from to calculate your taxes owed:

Option 1: You can pay exactly what you owe based on your net income so far this year, or

Option 2: You can do estimated payments based on the taxes you owed in the previous year.

Here’s how to figure out how much you owe with the two options above:

Option 1: Pay the Exact Amount You Owe

To determine your quarterly tax payment down to the penny, use Form 1040-ES here to calculate what you owe by following the instructions.

Option 2: Pay an Estimated Amount Based on What You Owed Last Year

Or, you can use an easier option known as the "safe harbor" rule of simply paying one-quarter of the taxes you owed last year on your previous year’s tax return on each due date.

To do this, look at the “Total Tax” line on Form 1040 of your previous year’s tax return. Then, divide this number by four, and pay that amount on each quarterly tax due date.

A note of caution with this method, if you make more income this year than in your previous year, you'll owe more taxes during tax season.

To understand more on the various ways to pay estimated quarterly taxes as a self-employed person read here.