Return Estimates and Tax Preparation: Why Quarterly Planning Matters

Estimated tax payments are required for any income that is not subject to withholding—such as self-employment income, freelance or contract work, investment earnings, rental income, or capital gains. The IRS requires individuals to make quarterly payments if they expect to owe more than $1,000 in taxes after withholding and credits for the year.

Failing to pay enough throughout the year can lead to penalties and interest, even if you pay the full amount when you file. By paying quarterly, you:

• Stay compliant with IRS and Minnesota Department of Revenue requirements.
• Avoid underpayment penalties and last-minute stress.
• Manage cash flow by spreading tax liability throughout the year.
• Gain valuable insight into how your income fluctuates over time.

There are a few common methods for determining how much to pay each quarter:

1. Safe Harbor Method
   You can avoid penalties by paying the lesser of:

• 90% of your expected total tax for the current year, or
• 100% of the tax you paid in the prior year (110% if your adjusted gross income exceeded $150,000).

2. Annualized Income Method
   If your income varies by season or project—common among freelancers, consultants, and business owners—you may calculate quarterly payments based on your actual income earned during each period.

For both IRS and Minnesota estimated payments, quarterly due dates are as follows:

Payment thresholds:

• IRS: Required if you expect to owe more than $1,000.
• Minnesota: Required if you expect to owe more than $500.

You can pay electronically using IRS Direct Pay, EFTPS, or the IRS2Go app, or by mailing a 1040-ES voucher with your payment. For Minnesota payments, use the e-Services portal or mail a voucher with your Social Security number in the memo line.

At Froehling Anderson, we do more than prepare tax returns—we help clients stay ahead of tax obligations and plan for long-term financial success. Our proactive approach to tax preparation and return estimates includes:

• Ongoing review of IRS and Minnesota regulations to ensure accuracy and compliance.
• Personalized quarterly calculations that reflect your income trends and tax goals.
• Year-end tax projections that help you plan for future liabilities and opportunities.
• Guidance on budgeting and cash flow so you can prepare without surprises.

As trusted accountants in Minneapolis and St. Cloud, Minnesota, our team is dedicated to providing accurate, timely, and client-focused tax services. Whether you’re self-employed, have multiple income streams, or simply want to avoid unexpected tax bills, we’re here to help you navigate each step of the process with confidence.

Quarterly planning is the foundation of year-end success. We help clients navigate estimated payments and tax preparation with accuracy, insight and proactive planning; while helping you stay compliant, avoid penalties and achieve greater financial clarity.

Connect with us today to schedule a free consultation with a CPA who understands your goals—and how to help you reach them.

Disclaimer: The information provided here is accurate at the time of publication but may change as laws and regulations evolve. While Froehling Anderson aims to share accurate, timely information, we encourage you to reach out to your relationship manager for guidance on your specific situation.

Additionally, this content is for informational purposes only and does not constitute legal, tax, or audit advice. Please consult with your CPA for guidance tailored to your situation.