If you earn income that isn’t subject to tax withholding – such as self-employment income, rental income, or investment earnings – you may need to make quarterly estimated tax payments. These payments help you stay on track with your tax obligations and avoid surprise amounts due at tax time.
What are quarterly estimated tax payments?
If you don’t have tax withheld from your wages, estimated tax payments are a way to make sure your taxes still get paid throughout the year. When you make estimated payments throughout the year, the goal is that you won’t have a huge bill or face penalties when it’s time to file your tax return. Quarterly estimated payments cover your federal tax liabilities like income tax, Social Security, and Medicare.
Who should make quarterly estimated tax payments?
If you earn money that is not subject to withholdings, you probably need to make quarterly payments. This is common if you have income from the following sources:
- Self-employment/you work for yourself
- Alimony
- Unemployment
- Social Security
- Interest
- Dividends
- Capital gains
- Prizes and awards
In general, you should make estimated tax payments if you expect to owe $1,000 or more to the IRS (after deductions and credits have been applied). A tax bill this large indicates that you are not having enough income withheld during the year to cover your liability. Consequently, you could owe a penalty if you don’t make quarterly payments and owe more than $1,000.
When are quarterly taxes due?
Quarterly estimated tax payments are typically due on the following dates:
- First quarter payment is due: April 15 (for Jan. 1 – Mar. 31)
- Second quarter payment is due: June 15 (for April 1 – May 31)
- Third quarter payment is due: Sept. 15 (for June 1 – Aug. 31)
- Fourth quarter payment is due: Jan. 15 (for Sept. 1 – Dec. 31)
The Jan. 15 payment is your fourth and final payment for the year that has just ended. If any of these due dates fall on a weekend or holiday, your payment is due the next business day.
If you live in a federally declared disaster area, you may have extra time to send your payments without a penalty.
How to calculate how much you owe for your quarterly taxes
To determine what your estimated payments should be, you will need to fill out Form 1040-ES. Simply download the form and enter the information manually. Note: You will need to complete this form on paper. It can’t be filled out online using TaxSlayer.
The simplest way to estimate your quarterly payments is to use your prior year’s tax return as a guide. Divide your total tax liability by four and pay that amount each quarter.
Other methods include:
- Annualized income method: If your income fluctuates, calculate your tax based on actual income earned during each period.
- IRS Form 1040-ES worksheet: This helps you estimate your tax based on projected income, deductions, and credits.
If you’re unsure, aim to pay at least 90% of your current year’s tax or 100% of last year’s tax (110% if your income was over $150,000) to avoid penalties.
How do I estimate quarterly taxes if I don’t know how much I’ll make?
You can pay your quarterly taxes online through the IRS Direct Pay system or the Electronic Federal Tax Payment System (EFTPS). Other options include:
- Debit or credit card payments (fees apply)
- Cash payments at participating IRS locations
- Check or money order by mail
- Same-day wire (bank fees may apply)
- Electronic funds withdrawal during e-filing only
Don’t forget to check your state’s requirements for estimated tax payments—many states have their own deadlines and payment portals.
What to do if you miss a quarterly tax payment
If you miss a quarterly tax payment, the best thing to do is send your payment as soon as possible. Don’t just wait until the next payment is due. If you do, you could be charged interest and penalties for missing deadlines. To minimize any possible late fees, make your payment as soon as you can.
What is the penalty for underpayment of estimated tax?
If you don’t pay enough throughout the year, you may face a penalty for underpaying. The IRS calculates this amount for you when you file your return, so you’ll see it reflected on your tax bill.
The penalty for underpaying your estimated taxes depends on a few factors:
- The amount that was underpaid
- When the underpayment was due and underpaid
- The interest rate for underpayments (the IRS publishes these each quarter)
But it’s important to note that people generally won’t be penalized if
- They owe less than $1,000 in tax after subtracting their withholdings and credits, or
- They paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller
Do you have to pay estimated taxes quarterly?
While quarterly payments are standard, you can pay your entire estimated tax amount at once or make more frequent installments, if that’s more convenient for you. For instance, instead of paying four equal payments of $1,200, you might prefer to make twelve monthly payments of $400. Just be sure you’ve paid enough by the end of each quarter.
Can you pay estimated taxes anytime?
You don’t have to wait for the deadline to submit your estimated tax payment for that quarter. When you’re ready, you can make your payment to the IRS by mail, over the phone, online, or through their app. Visit IRS.gov/payments to see all your options.
