If you're self-employed, own a small business, work as a freelancer, have a profitable side hustle or make money investing, you may be required to make quarterly estimated tax payments to the IRS. The IRS expects you to make quarterly estimated payments if you think you'll owe $1,000 or more when you file your taxes, after factoring in your total income, withholdings and credits.
How do you know if you meet the threshold? To avoid tax penalties, take time to learn how much you'll need to pay in quarterly taxes, when quarterly tax payments are due and how to make your payments to the IRS. Here's how to pay your quarterly taxes.
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1. Determine if You Need to Pay Quarterly Taxes
If you're a small business owner, a freelancer, a contractor or a moonlighter, you'll likely owe quarterly taxes. Also, if you have significant income from investments or taxable spousal support that isn't covered by withholdings (as taxes on your paycheck are), quarterly tax payments may be in order. Here are some IRS examples of income that may require quarterly tax payments:
- Self-employment income
- Interest
- Dividends
- Capital gains
- Alimony
- Prizes and awards
The general rule is to consider quarterly tax payments when you expect extra income to generate at least $1,000 in additional taxes that aren't covered by withholding. Loosely speaking, that means you might be on the hook for estimated tax payments if you're single and your net self-employment, interest or investment income is roughly $4,500 or more if you're in the 22% tax bracket, or $4,150 and up if you're in the 24% tax bracket.
For quick reference, here are marginal tax rates and tax brackets for single filers in 2024.
| 2024 Tax Brackets for Single Filers | |
|---|---|
| Rate | Tax Bracket |
| 10% | $0 to $11,600 |
| 12% | $11,601 to $47,150 |
| 22% | $47,151 to $100,525 |
| 24% | $100,526 to $191,950 |
| 32% | $191,951 to $243,725 |
| 35% | $243,726 to $609,350 |
| 37% | Over $609,350 |
Source: IRS
When You Don't Need to Pay Estimates
The IRS doesn't require you to make estimated payments if you meet all three of these requirements:
- You had no tax liability for the prior year.
- You were a U.S. citizen or resident alien for the whole year.
- Your prior tax year covered a 12-month period.
You may also avoid paying estimates if you can adjust your withholding to cover all or most of your additional tax bill. To do this, file a new Form W-4 with your employer, indicating the additional amount you would like withheld from your paychecks.
2. Calculate Your Estimated Quarterly Tax Payment
Form 1040-ES Estimated Tax for Individuals includes worksheets to help you calculate how much estimated tax you owe. Although your estimated tax is only an estimate—and not a down-to-the-penny calculation of your final tax bill—the best way to figure out what you've made and what you owe is to factor in your gross (and net) income, expenses, deductions, payments and credits, just as you do at tax time.
You may be able to shortcut this process if you paid taxes on similar income last year. In that case, check your prior year's tax return to see roughly how much you should add in estimated tax payments.
You can calculate your quarterly estimated tax payments a couple of different ways. The method you use may depend on the regularity of your self-employment income.
Make Four Regular Installments
If your income is reliable and predictable, estimate your total income, adjustments and deductions for the full year. Calculate self-employment taxes (if applicable) and regular income taxes, then subtract your expected withholdings plus any tax credits you expect to claim. This is your estimated tax bill for the year. Divide this number into four installments and pay the quarterly amount in April, June, September and January.
You'll want to ensure that you're paying enough each quarter to avoid a penalty, so check in quarterly to match up your actual income against your projections. Increase your payment if your income is higher than expected.
Pay Based on Your Quarterly Income
If your income from self-employment fluctuates, your quarterly taxes can vary too. The annualized income installment method can help you estimate your taxes more accurately than the regular installment method and adjust your payments based on what you earned.
Use Form 1040-ES to estimate your actual income, expenses and deductions each quarter and determine your tax liability, including self-employment tax if appropriate. Alternatively, consider using tax software or working with a tax professional to make paying quarterly taxes easier.
Avoid Underpayments
If you underpay your estimated taxes by $1,000 or more, you may owe the IRS a penalty. That's why making accurate estimates throughout the year is key. However, the IRS does allow you to avoid penalties if your total estimated tax and withholding payments are within $1,000 of your final tax bill, add up to at least 90% of your total tax bill or equal 100% of your prior year's taxes.
The IRS also may waive your penalty if you suffered a casualty, disaster or other unusual circumstance, or if you retired (after age 62) or became disabled during the tax year and your underpayment was due to reasonable cause.
3. Meet the Estimated Tax Payment Deadlines
To avoid a penalty for underpaying or missing a payment, be sure to pay estimated taxes by each year's quarterly tax deadline. Here are the 2024 deadlines.
| 2024 Estimated Tax Payment Deadlines | |
|---|---|
| First quarter (January to March) | April 15, 2024 |
| Second quarter (April to June) | June 17, 2024 |
| Third quarter (July to September) | September 16, 2024 |
| Fourth quarter (October to December) | January 15, 2025 |
Source: IRS
4. Choose How to Make Estimated Tax Payments
You can make your estimated tax payments online, by phone or by mail. Here's a quick guide to your options.
- Pay with a debit card, credit card or digital wallet through one of the IRS-approved third-party payment processors. If you choose this option, you can pay by phone as well. Visit the IRS payment site for details.
- Use your bank account to make a direct payment via Direct Pay. You can use your payment confirmation number to look up your payment, or to modify or cancel a scheduled payment up to two days before the payment date.
- Make a payment via the Electronic Federal Tax Payment System. You'll receive a documented proof of payment and confirmation number when your payment processes.
- Mail a check or money order to the IRS address shown on Form 1040-ES. When you pay by mail, the postmark on your payment is the payment date.
Frequently Asked Questions
In general, you should make quarterly estimated tax payments if you expect to owe at least $1,000 in taxes after subtracting taxes you've already had withheld from your paycheck and any tax credits or applied refunds. Some of the most common income triggers for quarterly estimates are self-employment income (including gig work), investment income, interest, alimony and capital gains.
You can make quarterly estimated tax payments online from your bank account using IRS Direct Pay; the Electronic Federal Tax Payment System; or a credit card, debit card or digital wallet via a processor approved by the IRS. If you use a third-party processor to pay by card, they'll add a payment processing fee of a few dollars or up to 2% of the payment.
Making estimated tax payments online is easy and it ensures your check won't get lost in the mail. To make online payments with the IRS, be prepared to verify your identity online.
You may be able to avoid an underpayment penalty if one of the following applies to you.
- You owe less than $1,000 after subtracting withholdings and credits.
- You have paid at least 90% of the tax you owe for the current year.
- You have paid 100% of your tax for the prior year.
There are special rules for farmers, fishermen and some high-income taxpayers. Check Publication 505, Tax Withholding and Estimated Tax for details.
If your estimated tax payments and withholdings fall short of covering your tax bill by $1,000 or more (see information on the safe harbor rule above), you may pay a penalty on the amount you owe. IRS Form 2210 helps you report and calculate your underpayment penalty; you can also report the underpayment on your tax return and ask the IRS to calculate your penalty and send a bill.
If your payments are late (or missed), you may pay a separate penalty for making late estimated tax payments, which may be taken out of your tax refund if you're owed one.
Plan Now, Pay on Time
Estimated taxes may seem daunting, especially if you're newly self-employed, but paying on time is manageable if you stay organized. Make note of quarterly due dates, keep records of your income and expenses, save your receipts and budget for taxes. You may want to open a separate high-yield savings account or money market account so you won't be tempted to spend the cash you'll owe in taxes. Though making quarterly payments isn't fun, it's often easier to digest than a single large payment plus penalties at the end of the year.
Many freelancers and self-employed workers use tax filing software to make the job easier. If even that sounds like a lot, think about outsourcing some of the work to a bookkeeper or work with a tax professional to ensure you've claimed the maximum possible deductions and filed your taxes accurately.