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Quarterly estimated taxes are advance payments made to the IRS four times per year on income not subject to withholding. Payment deadlines are April 15, June 15, September 15, and January 15. You need to pay if you expect to owe $1,000 or more in federal taxes and your withholding won't cover it.
If you're an entrepreneur, freelancer, or small business owner, quarterly estimated taxes can feel like one of the most confusing responsibilities that comes with earning income outside a traditional paycheck. Unlike employees, no one withholds taxes from your business income for you. That means you're responsible for estimating how much tax you owe and paying it to the IRS throughout the year. When that doesn't happen correctly, penalties, interest, and cash-flow stress can follow.
This comprehensive guide explains what quarterly estimated taxes are, who needs to pay them, how to calculate payments using Form 1040-ES, when payments are due, and what to do if things don't go exactly as planned all in straightforward language.
Quarterly estimated taxes are advance payments you make to the IRS on income that isn't subject to automatic withholding.
The U.S. tax system operates on a pay-as-you-go basis. Instead of waiting until April to collect everything at once, the IRS expects taxes to be paid as income is earned throughout the year.
Estimated taxes generally include:
To help individuals calculate and submit these payments, the IRS provides Form 1040-ES.
Official IRS overview of Form 1040-ES: https://www.irs.gov/forms-pubs/about-form-1040-es
You generally need to make quarterly estimated tax payments if:
This often applies to:
You may not need to pay estimated taxes if:
IRS estimated tax guidance: https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes
Form 1040-ES is not a tax return, and it isn't filed once a year like Form 1040.
Instead, it includes:
The worksheet helps you estimate what you owe. If you pay electronically (which is recommended), you don't submit the form itself you simply keep it for your records.
Download Form 1040-ES (PDF): https://www.irs.gov/pub/irs-pdf/f1040es.pdf
Accurate estimates depend on having a clear picture of your income and expenses. The process itself is straightforward once you understand the components.
Include all income that isn't subject to withholding, such as:
Pro tip: If your income fluctuates, use year-to-date figures and a reasonable projection for the rest of the year. It's better to slightly overestimate than underestimate.
Common deductions for self-employed individuals include:
This helps determine your taxable income rather than just gross revenue.
If you're self-employed, you'll typically owe self-employment tax, which covers Social Security and Medicare. For 2026, the self-employment tax rate is 15.3% (12.4% for Social Security + 2.9% for Medicare).
This tax is calculated separately from income tax and is often underestimated by first-time business owners. Remember: you can deduct half of your self-employment tax as an adjustment to income.
IRS self-employment tax information: https://www.irs.gov/businesses/small-businesses-self-employed/self-employed-individuals-tax-center
The IRS allows safe harbor rules that can help you avoid underpayment penalties even if your estimates aren't exact.
In most cases, you avoid penalties if you pay:
Safe harbor explanation: https://www.paychex.com/articles/payroll-taxes/quarterly-taxes
Example: If your 2025 tax liability was $20,000, paying at least $20,000 in estimated taxes for 2026 (in four equal installments of $5,000) protects you from penalties—even if you end up owing $25,000 when you file.
Once you estimate your total annual tax, divide it into four equal payments. Revisit this calculation during the year if income or expenses change significantly.
Helpful calculation walkthrough: https://turbotax.intuit.com/tax-tips/self-employment-taxes/a-guide-to-paying-quarterly-taxes/L6p8C53xQ
Quarterly payment deadlines are fixed, and missing them can lead to penalties. Here are the 2026 deadlines:
*June 15, 2026 falls on a Monday; deadline remains June 16, 2026.
Important: If a due date falls on a weekend or federal holiday, the deadline moves to the next business day.
These deadlines apply to federal estimated taxes; state deadlines may differ.
IRS deadline reference: https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes
Estimated tax payments are not set in stone. You can and should recalculate them if your financial situation changes.
Common reasons to adjust payments include:
Revisiting estimates quarterly helps prevent underpayment and large year-end balances.
If your income is uneven or seasonal (common for consultants, retailers, or service providers), dividing estimated tax evenly across four quarters may not reflect reality.
The IRS allows the annualized income method, which bases payments on income earned during each specific period rather than a flat estimate. This can be useful for businesses with fluctuating revenue.
Annualized income method overview: https://www.fidelity.com/learning-center/smart-money/estimated-tax-payments
You can submit payments in several ways. Electronic payments are generally faster, more secure, and easier to track.
IRS payment options: https://www.irs.gov/payments
You can mail a check with the appropriate payment voucher from Form 1040-ES. Allow extra time for processing, and send via certified mail for proof of payment.
If you miss a payment or underpay:
Current IRS underpayment penalty rate: Generally tied to the federal short-term rate plus 3%
If you discover a missed payment, paying as soon as possible and adjusting future estimates can help limit additional charges.
What happens when a payment is missed: https://www.bpm.com/insights/what-happens-if-you-miss-quarterly-estimated-tax-payment/
If estimating current-year income feels difficult, last year's tax return can serve as a practical baseline.
Using prior-year tax figures can:
Simply take your total tax from line 24 of your 2025 Form 1040, divide by 4, and pay that amount quarterly. This approach qualifies for safe harbor protection.
IRS guidance on using prior-year taxes: https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes
Let's walk through a practical example:
Sarah's Situation:
Step-by-Step Calculation:
Many first-time entrepreneurs only calculate income tax and forget the 15.3% self-employment tax. This can result in significantly underpaying.
Landing a major contract mid-year? Your original estimate is now outdated. Recalculate and increase remaining payments.
The second quarter deadline (June 15/16) catches many people off guard because it only covers two months of income, not three.
If you miss April 15, don't wait until June 15. Pay as soon as possible to minimize penalties.
Always keep confirmation numbers, receipts, and payment records. Electronic payments automatically create a paper trail.
Most states with income tax also require quarterly estimated payments. State deadlines typically mirror federal deadlines, but not always.
Check your state's department of revenue website for specific requirements.
Quarterly estimated taxes rely on one thing above all else: accurate, up-to-date financial data.
Modern AI-powered accounting platforms act as virtual CFOs by keeping your books clean, current, and tax-ready throughout the year. Automated transaction categorization, reconciliation, and real-time financial insights help you clearly understand income, expenses, and cash flow as they happen.
That clarity makes quarterly tax planning far more manageable. Instead of estimating based on outdated numbers or rough guesses, you're working from real data every time a payment is due.
Key features that help with quarterly taxes:
With the right tools, quarterly estimated taxes become a planning exercise not a last-minute scramble.
Quarterly estimated taxes don't have to be overwhelming, but they do require consistency and awareness. Once you understand who needs to pay, how estimates are calculated, and when payments are due, the process becomes far more manageable.
The biggest mistakes usually come from outdated numbers, missed deadlines, or not adjusting estimates as income changes. Staying proactive—reviewing your finances regularly and recalculating when needed—can help you avoid penalties and year-end surprises.
With the right systems in place and a clear understanding of Form 1040-ES, quarterly tax payments become part of your routine rather than a source of stress. A little preparation each quarter goes a long way toward keeping your business compliant, cash-flow stable, and focused on growth instead of tax headaches.
Remember: The IRS prefers you to overpay slightly throughout the year rather than underpay. You'll get any overpayment back as a refund, but underpayment comes with penalties and interest.
Start with conservative estimates, track your actual income quarterly, adjust as needed, and you'll master the quarterly tax process in no time.
Additional Resources:
Disclaimer: This article is for educational purposes only and does not constitute tax, legal, or financial advice. Tax laws are complex and subject to change. Please consult with a qualified tax professional or financial advisor to discuss your specific situation and ensure compliance with current regulations.
