Who Is Required to Make Estimated Tax Payments?
You generally must make estimated payments if you expect to owe at least $1,000 in federal tax after subtracting withholding and credits, and if withholding covers less than 90% of the current year's liability or 100% of the prior year's (110% for high earners). Common filers include freelancers, consultants, landlords, retirees with investment income, and business owners.
What Are the Estimated Tax Payment Due Dates?
The IRS schedules four estimated tax payment deadlines: April 15 for income earned January through March, June 15 for April through May income, September 15 for June through August income, and January 15 of the following year for September through December. If a deadline falls on a weekend or holiday, it shifts to the next business day.
What Happens If You Miss or Underpay Estimated Taxes?
The IRS charges an underpayment penalty calculated at the federal short-term interest rate plus 3%, applied quarterly on the shortfall. The penalty is avoided by meeting safe harbor thresholds — paying at least 90% of the current year's tax or 100% of last year's tax. Increasing withholding from any remaining wages or retirement distributions can substitute for estimated payments.
Frequently asked questions
How do I calculate how much to pay in estimated taxes?
Use IRS Form 1040-ES, which includes a worksheet to estimate annual income, deductions, and credits. Divide the estimated annual tax by four for equal quarterly payments, or calculate each quarter based on actual income earned to that point — useful when income is seasonal or variable.
Can I skip the last estimated payment if I plan to file early?
You can skip the January 15 fourth-quarter payment if you file your complete tax return and pay all tax owed by January 31. Otherwise, pay by January 15 to avoid the underpayment penalty for the fourth quarter.