Kara Sears
The US tax system works on a pay-as-you-go basis, with the IRS collecting income taxes throughout the year. While salaried employees typically pay their taxes in April, freelancers, small business owners, and anyone else earning at least $1,000 in income that hasn't been subject to federal withholdings may be required to submit quarterly payments. This is known as estimated quarterly taxes and is mandated by law for certain groups.
| Characteristics | Values |
|---|---|
| Who needs to pay quarterly taxes? | Self-employed people, independent contractors, freelancers, and people with side gigs who expect to owe $1,000 or more in taxes. Businesses and corporations may also need to make quarterly payments if they expect to owe at least $500 for the tax year. |
| How often do you need to pay? | Quarterly, i.e., four times a year. However, you can also make payments more often (e.g., weekly, bi-weekly, monthly, etc.) as long as you've paid enough by the end of each quarter. |
| When are the payments due? | The due dates for quarterly tax payments are in January, April, June, and September. |
| How much do you need to pay? | You need to pay at least 90% of your tax liability for the quarter or year. However, farmers and fishermen who earn at least two-thirds of their income from these activities only need to meet 66 2/3% of their tax liability. |
| What if you don't pay enough? | If you don't pay enough tax by the due date of each quarter, you may be charged a penalty for underpayment, even if you are due a refund when you file your income tax return. |
| How can you pay? | You can pay your quarterly taxes online using the Electronic Federal Tax Payment System or with paper forms from the IRS. |
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What You'll Learn
Who needs to pay quarterly income tax?
In the US, income taxes are collected on an ongoing basis, with employers paying federal and state taxes on behalf of their employees by withholding a certain amount from each paycheck. However, if you are self-employed, a freelancer, or receive certain types of non-wage income, you may need to pay what the IRS calls "estimated quarterly taxes".
Quarterly taxes are paid by those who are self-employed, including independent contractors, sole proprietors, and small business owners. They are also paid by businesses, corporations, and some investors. If you are a W-2 worker, you may need to pay quarterly taxes if your tax liability is not fully covered by your withholdings.
The IRS uses a pay-as-you-go income tax system, meaning you must pay your taxes as you earn income. It enforces this by charging penalties for underpayment. You get them if you haven't paid enough income taxes through withholding or making quarterly payments. It also charges penalties on late payments, even if you end up getting a refund.
The IRS uses a couple of rules to determine if you need to make quarterly estimated tax payments:
- You expect to owe more than $1,000 after subtracting withholding and tax credits when filing your return.
- You expect your withholding and tax credits to be less than 90% of your estimated tax liability for the current tax year or 100% of the previous year's tax liability, assuming it covers all 12 months of the calendar year. These are commonly referred to as safe harbour rules. The 100% requirement increases to 110% if your adjusted gross income exceeds $150,000 ($75,000 if you're married and filing separately).
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How much do you need to pay?
The amount you need to pay in quarterly taxes depends on your income and other factors. The IRS uses a pay-as-you-go income tax system, meaning you must pay your taxes as you earn income. This can be done through withholding or estimated quarterly tax payments.
If you are an employee, your employer will typically withhold federal and state taxes from your paycheck. However, if you are self-employed, a freelancer, or a business owner, you may need to pay estimated quarterly taxes. This is because no tax is automatically withheld from your income. In addition, if you receive certain types of non-wage income, such as interest, dividends, alimony, or capital gains, you may need to pay estimated quarterly taxes.
The IRS has specific rules to determine if you need to make quarterly estimated tax payments:
- You expect to owe $1,000 or more in federal income taxes for the year, even after accounting for your withholding and refundable credits.
- Your withholding and refundable credits will cover less than:
- 90% of your estimated tax liability for the current tax year
- 100% of your previous year's tax liability, assuming it covers all 12 months of the calendar year
- 110% if your adjusted gross income exceeds $150,000 ($75,000 if married filing separately)
If you are a business, you may need to make estimated income tax payments if you will owe at least $500 for the tax year.
You can estimate your quarterly tax payments by dividing the amount you owed in taxes the previous year by four. For example, if you owed $20,000 in taxes last year, you would pay $5,000 each quarter. If your income is uneven throughout the year, you can adjust your quarterly payments accordingly.
It is important to pay your estimated quarterly taxes on time to avoid penalties for underpayment or late payment, even if you are due for a refund when you file your tax return.
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How to calculate quarterly income tax
In the US, income taxes are generally collected by employers who pay federal and state taxes by withholding a certain amount from each paycheck. However, if you are self-employed, a freelancer, or receive certain types of non-wage income, you may need to pay estimated quarterly taxes. This also applies to W-2 workers whose tax liability is not fully covered by their withholdings.
To calculate your quarterly income tax, you must first estimate the amount of income you expect to earn for the year. You can use your income, deductions, and credits for the prior year as a starting point. You can then use Form 1040-ES to show your income estimate and project your tax liability. If your income changes during the year, you can adjust your quarterly payments.
There are a few online quarterly tax calculators that can help you estimate your quarterly tax bill. These calculators take into account your filing status, standard deduction, and any tax credits you may be eligible for. It is important to note that if you overpay your taxes, you will receive a refund, and if you underpay, you may be charged a penalty.
The IRS collects quarterly taxes in January, April, June, and September. You can also make payments more frequently if that is easier for you, as long as you have paid enough by the end of each quarter.
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When are payments due?
The IRS collects income taxes throughout the year via payroll taxes. Ideally, when you file your tax return, you have already paid all your taxes by the April deadline. The IRS uses a pay-as-you-go income tax system, meaning you must pay your taxes as you earn income. The year is divided into four payment periods, each with a specific payment due date. These dates are in January, April, June, and September, but they don't coincide with regular calendar quarters. For example, in 2025, estimated tax payments are due on April 15, June 16, and September 15. The final due date is January 15, 2026, which applies to income earned in the fourth quarter of 2025.
If you are self-employed, you are required to pay quarterly taxes. This includes independent contractors, freelancers, and people with side gigs. If you expect to owe more than $1,000 in taxes for the year, you may need to make quarterly tax payments. This can be done by using Form 1040-ES. If you don't pay enough tax by the due date for each of the payment periods, you may be charged a penalty. However, if your income is received unevenly throughout the year, you may be able to lower the penalty by annualizing your income and making unequal payments.
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What happens if you don't pay?
In the US, income taxes are collected on an ongoing basis. The IRS uses a pay-as-you-go income tax system, which means that you must pay your taxes as you earn income. This is done either through withholding or estimated tax payments.
If you don't pay enough tax by the due date of each of the payment periods, you may be charged a penalty for underpayment even if you are due a refund when you file your income tax return. The IRS will send you a notice if you owe the Underpayment of Estimated Tax by Individuals Penalty. The penalty for underpayment of estimated tax generally cannot be waived due to reasonable cause, but there are some exceptions. The penalty may be removed or reduced if:
- The underpayment was due to a casualty, local disaster, or other unusual circumstances, and it would be inequitable to impose the penalty.
- You or your spouse retired in the past 2 years after reaching age 62 or became disabled, and you had reasonable cause to underpay or pay your estimated tax late.
If you can't pay the full amount of your taxes on time, pay what you can now and apply for a payment plan. You may reduce future penalties when you set up a payment plan. If you didn't receive a letter or notice, use telephone assistance.
If you are self-employed, your quarterly payments essentially take the place of withholding. The payments you make four times a year will cover both your income taxes and your self-employment taxes. If you work as an independent contractor, a sole proprietor, a member of a business partnership, or a person who otherwise runs a business as your own, you likely need to pay quarterly estimated taxes.
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Frequently asked questions
Self-employed people, independent contractors, freelancers, and people with side gigs who expect to owe $1,000 or more in taxes are mandated by law to pay quarterly income tax.
Corporations that expect to owe at least $500, landlords, and investors may need to pay quarterly income tax.
You can use a quarterly tax calculator or tax preparation software to calculate your estimated quarterly tax payment.
Quarterly income tax payments are typically due in January, April, June, and September.
If you don't pay enough quarterly income tax, you may have to pay a penalty for underpayment.
