When you receive income as a freelancer, employment taxes (Social Security and Medicare) and income taxes aren't withheld. It's your job to pay them — and the Internal Revenue Service requires you to do so every quarter.
Moreover, since you are considered to be self-employed, you must pay both the employer's share and the employee's share of the employment taxes.
Failure to pay these taxes every four months could result in penalties and interest, said Douglas Coats, a tax attorney with Gordon Feinblatt LLC in Baltimore. (Information on how to calculate estimated taxes can be found on the IRS website.)
The good news, Coats said, is that if you're filing as a Schedule C taxpayer, as freelancers do, "you're entitled to fully deduct all of your ordinary and necessary business expenses."