Who pays quarterly estimated taxes
You may have to pay quarterly estimated taxes if:
- You’re self-employed or freelance, so no employer withholds tax from your 1099 income.
- You collect rental income from a property you own.
- You have large capital gains, interest, or dividend payments from investments.
- You’re a W-2 employee whose paycheck withholding won’t cover your full tax bill.
The obligation kicks in once your expected tax bill after withholding and credits tops $1,000 for the year. For example, $60,000 of net self-employment income generates well over $1,000 in SE tax.
Note: An S corporation must make installment payments if the total of certain taxes is $500 or more, and C corporations use the $500 figure too.
Calculating your quarterly estimated tax payment
To calculate your estimated taxes, the basic steps are:
- Estimate your income for the year.
- Subtract deductions to get your taxable income.
- Calculate the tax on that amount (income tax + self-employment tax if you’re self-employed).
- Subtract any withholding or credits.
- Divide by 4 for your quarterly payment.
Form 1040-ES also walks you through the math.
Quarterly estimated tax due dates
| Quarter | Due date | Income period covered |
|---|---|---|
| Q1 | April 15 | January 1–March 31 |
| Q2 | June 15 | April 1–May 31 |
| Q3 | September 15 | June 1–August 31 |
| Q4 | January 15 (following year) | September 1–December 31 |
Source: Internal Revenue Service
If the due date falls on a legal holiday or weekend, it moves to the following business day.
Paying quarterly estimated taxes
You have a few ways to send the IRS your payment:
- IRS Direct Pay, which pulls the payment straight from your bank account for free.
- EFTPS (Electronic Federal Tax Payment System), which lets you schedule payments in advance.
- A debit or credit card through an IRS-approved processor, which charges a fee.
- A check or money order mailed with the voucher from Form 1040-ES.
Missed payments or underpayments
Missing a payment or paying too little can trigger an underpayment penalty, calculated separately for each quarter on Form 2210 rather than as one lump sum at year-end. You can generally avoid the penalty under the safe harbor rule by paying at least 90% of what you owe for the current year, or 100% of last year’s tax bill. The higher-income threshold is 110% of prior-year tax if your AGI was above $150,000 ($75,000 for married filing separately).
You don’t have to split your payments into four equal amounts, either. If you already know your full-year liability, you can pay it all with your first-quarter payment instead of spreading it out.
