Understanding Quarterly Estimated Taxes

What Are Estimated Taxes?

Estimated taxes are quarterly payments made to the IRS to cover income tax, self-employment tax, and other taxes that aren't subject to withholding. If you're self-employed, a freelancer, or have significant non-wage income, you likely need to pay estimated taxes.

Who Needs to Pay?

You generally must pay estimated taxes if:

• You expect to owe at least $1,000 in taxes
• Your withholding will be less than 90% of your current year tax liability
• Your withholding will be less than 100% of your prior year tax liability

2026 Payment Deadlines

| Quarter | Income Period | Due Date | |---------|--------------|----------| | Q1 | Jan 1 - Mar 31 | April 15 | | Q2 | Apr 1 - May 31 | June 15 | | Q3 | Jun 1 - Aug 31 | September 15 | | Q4 | Sep 1 - Dec 31 | January 15 (next year) |

How to Calculate Your Payments

Method 1: Prior Year Safe Harbor

Pay 100% of last year's tax liability (110% if AGI exceeded $150,000), divided into four equal payments.

Method 2: Current Year Estimate

Estimate your current year income and pay 90% of the expected tax liability in quarterly installments.

Method 3: Annualized Income Method

If your income fluctuates significantly, calculate each quarter based on actual income received.

How to Pay

1. IRS Direct Pay: Free electronic payment from your bank account
2. EFTPS: Electronic Federal Tax Payment System
3. Credit/Debit Card: Via approved payment processors (fees apply)
4. Check: Mail with Form 1040-ES voucher

Avoiding Penalties

Underpayment penalties can be avoided by:

• Paying at least 90% of current year taxes
• Paying 100% of prior year taxes (110% for high earners)
• Owing less than $1,000 at filing

State Estimated Taxes

Don't forget about state estimated taxes! Most states with income tax require quarterly payments with similar schedules.

Planning Tips

1. Set aside 25-30% of each payment received
2. Open a separate savings account for tax money
3. Review estimates quarterly and adjust as needed
4. Work with a CPA to optimize your strategy

Need Help?

Calculating and managing estimated taxes can be complex. Our team can help you determine the right payment strategy and avoid costly penalties.