Attention gig workers: Monday is the deadline to pay your third-quarter estimated taxes to Uncle Sam.
Contractors, freelancers and other self-employed workers must pay an estimate of what they owe each quarter in Social Security, Medicare and income taxes to the Internal Revenue Service. That’s different from traditional workers whose employer typically withholds these taxes from their paychecks.
If you don’t make estimated tax payments, you could get hit with an underpayment penalty from the IRS.
To avoid the penalty, you must pay at least 90% of the taxes you owe for the current tax year or 100% of your tax bill from last year. If your adjusted gross income last year was more than $150,000, then you need to pay 110% of the liability to avoid penalty.
How to figure out your estimated taxes
To calculate your estimated tax payment, use Form 1040-ES, Estimated Tax for Individuals from the IRS. Pull out your tax return from last year to help fill it out. If this is your first year filling out the form, you need to estimate how much you expect to earn this year.
Don’t worry if you don’t get it exactly right.
If your payment is too high, you can lower your payment for the next quarter. If you don’t pay enough this quarter, you can increase your payment for the fourth quarter.
Form 1040-ES also includes blank vouchers to use when you mail in your tax payments. Or, you can make payments online through the IRS Direct Pay site or through the Electronic Federal Tax Payment System (EFTPS).
The fourth and final payment for 2019 estimated taxes is due Jan. 15, 2020.
Janna is an editor for Yahoo Finance. Follow her on Twitter @JannaHerron.