Quarterly estimated taxes, explained
No employer is withholding tax from your income, so the IRS asks you to prepay it four times a year. Here's who owes, when, how much, and how to never trip the penalty.
Why they exist
The U.S. tax system is “pay as you go.” Employees have tax withheld from every paycheck automatically. When you're self-employed, nobody does that for you — so you send the IRS estimated payments through the year instead of one big check in April.
Who owes them
As a rule, you owe estimated taxes if you expect to owe at least $1,000for the year after withholding and credits. That's most freelancers and small business owners. If you also hold a W-2 job, one alternative is to bump up the withholding on that paycheck to cover your side income instead.
The four due dates
Payments are normally due around these dates (they shift to the next business day on weekends and holidays, so confirm each year):
- Q1 — about April 15 (income from Jan–Mar)
- Q2 — about June 15 (Apr–May)
- Q3 — about September 15 (Jun–Aug)
- Q4 — about January 15 of next year (Sep–Dec)
Note the periods aren't even calendar quarters — Q2 covers two months, Q4 covers four. That trips up a lot of people.
How much to send
Two ways to size each payment:
- Project this year — estimate your full-year net income, figure the income tax plus 15.3% self-employment tax on it, subtract any withholding, and split the rest across the remaining due dates.
- Use last year as a floor (safe harbor)— pay 100% of last year's total tax (110% if your prior-year AGI was over $150,000) in equal installments. Simple, and it guarantees no penalty.
Avoiding the penalty
The IRS charges an underpayment penalty (really interest) if you pay too little, too late. You're safe if you hit either safe harbor above: 90% of this year's tax or 100%/110% of last year's, paid on time. Pay online with IRS Direct Pay or EFTPS, or mail Form 1040-ES.
Frequently asked
Who has to pay quarterly estimated taxes?
Generally, anyone who expects to owe at least $1,000 in tax for the year after subtracting withholding and refundable credits. That covers most freelancers, contractors, and small business owners, because no employer is withholding tax from your income. If you also have a W-2 job, you can increase that paycheck's withholding instead of making separate payments.
When are quarterly estimated taxes due?
There are four payments a year, normally due around April 15, June 15, September 15, and January 15of the following year. The periods aren't even three-month quarters, and a due date that lands on a weekend or holiday shifts to the next business day, so confirm each year's exact dates with the IRS.
How do I avoid the underpayment penalty?
Use the safe harbor: pay at least 90% of this year's tax, or 100% of last year's total tax (110% if your prior-year AGI was over $150,000), in timely equal installments. Meet either threshold and the IRS won't charge an underpayment penalty even if you still owe a balance at filing. Pay online with IRS Direct Pay or EFTPS, or mail Form 1040-ES.
This guide is general information, not tax, legal, or accounting advice, and isn't a substitute for a licensed CPA or tax attorney. Tax rules change and depend on your situation; figures here are illustrative. Verify specifics against current IRS guidance or with your preparer.