When you work for an employer, they withhold income tax and FICA taxes from every paycheck and send them to the IRS on your behalf. When you are self-employed, or have other income without withholding, that does not happen automatically. The IRS expects you to pay as you earn — which means quarterly estimated tax payments.
Who Needs to Pay Estimated Taxes
You generally need to make estimated tax payments if:
- You expect to owe at least $1,000 in federal tax after subtracting withholding and credits
- Your withholding covers less than 90% of your current-year tax, or less than 100% of your prior-year tax
This applies to freelancers, contractors, small business owners, landlords, investors with significant capital gains, and anyone whose regular job withholding does not cover their full liability.
The Four Due Dates
Estimated taxes are due four times a year, covering the following income periods:
| Payment | Covers income earned | Due date | |---|---|---| | Q1 | January 1 – March 31 | April 15 | | Q2 | April 1 – May 31 | June 15 | | Q3 | June 1 – August 31 | September 15 | | Q4 | September 1 – December 31 | January 15 (following year) |
When a due date falls on a weekend or holiday, it shifts to the next business day.
How to Calculate What You Owe
The safest method is to pay 100% of last year's total tax split across four equal payments (110% if your prior-year adjusted gross income exceeded $150,000). This protects you from underpayment penalties even if your income turns out higher than expected.
A more precise approach is to estimate your current-year income and expenses, calculate your expected tax, subtract any withholding, and divide the remainder by four.
How to Make the Payment
You can pay through IRS Direct Pay (irs.gov/payments) using a bank account at no cost. You can also pay by debit or credit card, by check mailed with Form 1040-ES, or through EFTPS (Electronic Federal Tax Payment System).
What Happens If You Miss a Payment
Missing or underpaying estimated taxes can result in a penalty, even if you pay the full balance by April 15. The penalty is calculated based on how much was underpaid and for how long.
Planning Ahead
If your income is irregular — common with freelancers and seasonal businesses — estimating taxes can be tricky. A tax planning consultation with Financial Ace can help you set aside the right amount each quarter so you are never caught short at filing time. Book a consultation to review your situation.