Guide to Quarterly Estimated Taxes
The US has a "pay-as-you-go" tax system. If you have income not subject to withholding (like self-employment, interest, dividends, capital gains), you likely need to make quarterly estimated tax payments.
Who Must Pay?
You must make estimated tax payments if:
- You expect to owe at least $1,000 in tax after subtracting your withholding and credits, AND
- You expect your withholding and credits to be less than the smaller of:
- 90% of the tax to be shown on your current year's tax return, OR
- 100% of the tax shown on your prior year's tax return (110% if your AGI > $150k).
This applies to sole proprietors, partners, S-corp shareholders, and even W-2 employees with significant side income.
Payment Due Dates
| Payment Period | Due Date |
|---|---|
| Jan 1 – Mar 31 (Q1) | April 15 |
| Apr 1 – May 31 (Q2) | June 15 |
| Jun 1 – Aug 31 (Q3) | September 15 |
| Sep 1 – Dec 31 (Q4) | January 15 (next year) |
Note: If the due date falls on a weekend or holiday, payment is due the next business day.
How to Calculate Payments
You can use our Quarterly Tax Calculator to estimate your payments. The general process is:
- Estimate your total taxable income deductions, and credits for the year.
- Calculate your estimated tax liability (Income Tax + Self-Employment Tax).
- Divide by 4 to get equal quarterly installments.
Note on uneven income: If your income varies during the year, you may use the Annualized Income Installment Method (Form 2210) to pay less in low-income quarters, but this requires complex calculations.
Safe Harbor Rules
To definitely avoid an underpayment penalty, pay the "Safe Harbor" amount:
- 100% of Prior Year Tax: Use the "Total Tax" from last year's return (Line 24 on 2023 Form 1040).
- 110% Rule: If your prior year AGI was over $150,000 ($75,000 MFS), you must pay 110% of prior year tax to be safe.
Paying this amount protects you from penalties even if you owe thousands more when you file your return.
How to Pay
- IRS Direct Pay: Pay online directly from your bank account (free). Choose "Estimated Tax" and the correct tax year or quarter.
- EFTPS: Electronic Federal Tax Payment System (requires enrollment).
- Debit/Credit Card: Pay through approved processors (fees apply).
- Mail: Send a check with Form 1040-ES voucher.
Don't Forget State Taxes!
Most states with income tax also require estimated payments if you owe above a certain threshold (often $500 or $1,000). Check your state's department of revenue for specific rules and due dates (usually similar to federal).