Quarterly Estimated Tax
Tax payments made four times a year by self-employed individuals and others with income not subject to withholding. Due dates are April 15, June 15, September 15, and January 15.
Quarterly estimated tax payments are how self-employed individuals, freelancers, and people with significant non-wage income (investment income, rental income, etc.) fulfill the IRS pay-as-you-go requirement. Payments are due on April 15, June 15, September 15, and January 15 of the following year.
You generally need to make estimated payments if you expect to owe $1,000 or more in tax after subtracting withholding and credits. To calculate each payment, estimate your expected income, deductions, and credits for the year, then divide the estimated tax due by four. You can use Form 1040-ES or simply pay online at IRS.gov/payments.
Missing or underpaying estimated taxes can trigger penalties. However, the safe harbor rules protect you: if you pay at least 100% of the prior year's tax liability (110% if prior-year AGI was over $150,000) through a combination of withholding and estimated payments, no penalty applies regardless of what you owe on your current return.
Related Terms
Self-Employment Tax
The combined Social Security (12.4%) and Medicare (2.9%) tax paid by self-employed individuals — effectively both the employee and employer shares of FICA, totaling 15.3%.
Safe Harbor
IRS rules that protect you from underpayment penalties if you pay at least 100% of the prior year's tax (110% if AGI over $150,000) or 90% of the current year's tax.
Pay-As-You-Go (PAYG)
The US tax system requires taxes to be paid throughout the year as income is earned, either through employer withholding or quarterly estimated tax payments.
Penalty
A charge imposed by the IRS for filing late, paying late, or underpaying estimated taxes. Common penalties include failure-to-file (5% per month) and failure-to-pay (0.5% per month).