When you work for an employer, taxes are withheld from your paycheck automatically. When you’re self-employed or running a business, that doesn’t happen — and the IRS expects you to keep up with your tax liability throughout the year through quarterly estimated tax payments.
Miss them, and you’ll owe a penalty at tax time even if you pay your full balance in April. Here’s what you need to know.
Who Needs to Pay Estimated Taxes?
You generally need to make quarterly estimated tax payments if you expect to owe at least $1,000 in federal taxes for the year after subtracting withholding and refundable credits. This applies to most self-employed individuals, freelancers, sole proprietors, partners in a partnership, and S-Corp shareholders who receive distributions beyond their salary.
When Are They Due?
The IRS estimated tax schedule follows four payment periods — note that they’re not evenly spaced:
- Q1 (January 1 – March 31): Due April 15
- Q2 (April 1 – May 31): Due June 15
- Q3 (June 1 – August 31): Due September 15
- Q4 (September 1 – December 31): Due January 15 of the following year
If a due date falls on a weekend or federal holiday, it shifts to the next business day.
How Much Should You Pay?
There are two safe harbor methods that protect you from underpayment penalties:
Option 1 — Pay 100% of last year’s tax liability (or 110% if your prior-year AGI exceeded $150,000). This is the simpler approach: divide your prior-year tax bill by four and pay that amount each quarter, regardless of how this year is going.
Option 2 — Pay 90% of your current-year liability. This requires estimating your income and deductions for the current year, which takes more work but can result in lower payments if this year is slower than last.
How Do You Actually Pay?
The easiest method is through the IRS’s Electronic Federal Tax Payment System (EFTPS) at eftps.gov, or through IRS Direct Pay at directpay.irs.gov. You can also mail a check with Form 1040-ES. Most people find the online options faster and easier to track.
Don’t forget Texas: Texas has no individual income tax, but if you have employees or sales tax obligations, those have their own separate filing and payment schedules.
What If You Missed a Payment?
Don’t panic — and don’t try to make it up by doubling the next payment. The underpayment penalty is calculated separately for each quarter. Catching up doesn’t erase the prior quarter’s penalty, but staying current going forward limits your overall exposure.
If managing quarterly payments feels like a guessing game, it’s worth working with a CPA to get a reliable estimate each year. Sadler Accounting works with self-employed professionals and small business owners throughout the Keller and Fort Worth area to take the uncertainty out of tax planning.