Estimated Quarterly Taxes: A Complete Guide

If you're self-employed, freelancing, or have income without tax withholding, you likely need to make quarterly estimated tax payments. Here's everything you need to know.

Who Needs to Pay Estimated Taxes?

You generally need to make estimated payments if:

• You expect to owe $1,000 or more in federal tax after subtracting withholding and credits
• You're self-employed, a freelancer, or an independent contractor
• You have significant income from investments, rental property, or other sources without withholding
• You're a partner or S-corporation shareholder

If you're a W-2 employee and your employer withholds enough tax, you probably don't need to worry about estimated payments.

2026 Due Dates

Note: Q2 covers only 2 months (April–May), not 3. The IRS calendar is not evenly divided.

How to Calculate Your Payments

There are two safe harbor methods to avoid underpayment penalties:

1. Current-year method: Pay at least 90% of your current-year tax liability, divided into 4 equal payments.
2. Prior-year method: Pay 100% of your prior-year tax liability (110% if your AGI exceeded $150,000), divided into 4 equal payments. This is often easier since you already know last year's number.

Most self-employed filers use the prior-year method because it's simpler and eliminates guesswork.

Don't Forget Self-Employment Tax

In addition to income tax, self-employed individuals owe self-employment tax (Social Security + Medicare) at 15.3% on net earnings up to the Social Security wage base ($176,100 for 2025), plus 2.9% Medicare on earnings above that. Your estimated payments should cover both income tax and self-employment tax.

How to Pay

• IRS Direct Pay (irs.gov/payments) — free bank transfer
• EFTPS (Electronic Federal Tax Payment System) — requires enrollment
• IRS2Go app — mobile payment
• Mail Form 1040-ES — paper voucher with check

Underpayment Penalties

If you don't pay enough through withholding and estimated payments, the IRS charges an underpayment penalty based on the federal short-term interest rate plus 3 percentage points (currently around 7-8%). The penalty is calculated on the underpaid amount for each quarter.

You can avoid the penalty by meeting either safe harbor: 90% of current-year tax or 100%/110% of prior-year tax.

Key Takeaways

• Pay quarterly if you expect to owe $1,000+ after withholding
• The prior-year safe harbor (100%/110% of last year's tax) is the simplest method
• Include self-employment tax in your estimates, not just income tax
• Use IRS Direct Pay for free, instant payment
• Penalty avoidance is easier than many people think — the safe harbors are generous