Quarterly Estimated Taxes for Self-Employed Drivers

Self-employed workers do not have an employer withholding tax for them. The IRS expects you to pay quarterly instead. If you expect to owe more than $1,000 in federal tax for the year, you owe estimated payments. And underpayment penalties accrue if you skip them.

The four deadlines

• Q1: April 15 (covers Jan-Mar income)
• Q2: June 15 (covers Apr-May income)
• Q3: September 15 (covers Jun-Aug income)
• Q4: January 15 of the following year (covers Sep-Dec income)

Two ways to calculate

Safe harbor 1: pay 100% of last year's total tax (110% if your AGI was over $150,000), divided into four equal quarters. No surprises if last year was a known number.

Safe harbor 2: pay 90% of this year's actual tax. More accurate but requires forecasting income, deductions, and tax. Most self-employed workers default to safe harbor 1 because it is simpler.

How mileage factors in

Your mileage deduction reduces taxable income BEFORE the quarterly estimate. Track miles in real time and apply year-to-date deduction to year-to-date income before calculating each quarter's estimate. A driver with 8,000 business miles by June 15 has a $5,800 deduction reducing the Q2 base.

Underpayment penalty

The IRS charges interest (6-8% annualized in recent years) on any quarterly shortfall. The penalty is computed quarter-by-quarter, so paying nothing the first three quarters and a lump sum in January does not avoid the penalty for Q1-Q3.

How to actually pay

• Form 1040-ES (paper voucher mailed with check)
• IRS Direct Pay (free, from a bank account)
• EFTPS (Electronic Federal Tax Payment System)
• Credit/debit card (with processing fee. Usually not worth it)

State estimated taxes

Most states with income tax have parallel quarterly estimates. Deadlines often match federal but rules vary. Check your state's page on the states hub.

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