Quarterly Estimated Taxes Explained: Who Needs to Pay and When

If you’re self-employed, run a business, or earn income from investments, understanding your quarterly tax obligations is essential. Unlike W-2 employees whose taxes are withheld by employers, you’re responsible for estimating and submitting payments to the IRS throughout the year. Missing these deadlines, or calculating incorrectly, can result in costly penalties.

This guide explains who is required to make quarterly payments, when they’re due, and how to calculate them correctly.

Who Needs to Pay Quarterly Estimated Taxes?

The IRS generally requires estimated tax payments if both of the following apply:

1. You expect to owe at least $1,000 in federal income tax after subtracting withholding and refundable credits.
2. Your tax withholding and credits will be less than the smaller of:
   • 90% of your current year’s tax liability, or
   • 100% of your previous year’s tax liability (110% for high-income earners).

​This requirement often applies to:

• Freelancers, independent contractors, and consultants
• Small business owners
• Real estate investors and landlords
• Stockholders and those with capital gains
• Anyone earning passive income without withholding

If you fall into one of these categories, you’re likely expected to pay estimated taxes

When Are Quarterly Estimated Taxes Due?

Estimated tax payments are divided into four periods over the year. Each payment covers income earned during that quarter:

Payment Period: January 1 – March 31
Due Date: April 15 

Payment Period: April 1 – May 31
Due Date: June 15

Payment Period: June 1 – August 31
Due Date: September 15

Payment Period: September 1 – December 31
Due Date: January 15 of the following year

If a due date falls on a weekend or holiday, the deadline is extended to the next business day.

How to Calculate Your Estimated Tax

To calculate estimated taxes, you need to estimate your total income, deductions, and credits for the year.

​Steps:

1. Estimate your total income for the year from all sources not subject to withholding.
2. Subtract deductions (standard or itemized) and any applicable business expenses.
3. Calculate your expected tax liability using the IRS tax brackets.
4. Subtract any tax credits or withholding (if applicable).
5. Divide the remaining amount by four to get your quarterly payment.
   
   

You can use IRS Form 1040-ES or utilize the services of a qualified CPA to help with the calculation and payment.

How to Pay

The IRS offers several payment methods:

• Online through IRS Direct Pay or the Electronic Federal Tax Payment System (EFTPS)
• By mail using a payment voucher from Form 1040-ES
• Via your tax software or with the help of a CPA​

​It's essential to keep records of your payments for filing your annual return.

What Happens if You Don’t Pay?

Failing to make required estimated tax payments or underpaying can lead to:

• IRS penalties and interest
• ​A larger tax bill in April, potentially with additional fines
• Cash flow issues if you haven’t budgeted for a lump-sum tax payment​

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​To avoid penalties, stay on schedule and review your income regularly, especially if it fluctuates.

Final Thoughts

Quarterly estimated taxes are a necessary part of managing your finances if you earn non-W-2 income. The rules are specific, the deadlines are firm, and the consequences for mistakes can be costly. Rather than risk underpayment penalties or scrambling at the last minute, consider getting professional support.
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Larry Bradford, CPA, helps business owners, freelancers, and high-income individuals stay compliant and tax-efficient. If you want clarity, precision, and peace of mind, contact Larry Bradford today. Call 512-402-0049 or send an email to [email protected] to schedule a consultation.