Estimated Tax Payments: Deadlines, Requirements, and Tips for Avoiding Penalties

Stumped by estimated tax payment requirements? Don’t know what form to use for estimated tax payments? We’ve got you covered.

In this guide, we’ll provide an overview of who is required to make estimated tax payments, how to calculate this payment amount, and other helpful tips to help you avoid paying more than what you owe.

What Are Required Estimated Tax Payments?

Estimated tax payments are exactly as they sound. They are tax payments that individuals and small businesses make to the IRS each quarter on income that is not subject to federal tax withholding.

In other words, it’s how these entities are able to pay taxes on the income they receive throughout the year, since it is not collected automatically (like for W-2 employees). Payers make an estimate of what they owe each quarter based on the income they report, and remit this payment to the IRS.

These payments count towards the payer’s total federal income tax obligations for the year. Depending on how accurate their estimates were each quarter, they may owe more or receive a refund upon filing their tax return.

Who Needs to Make Estimated Tax Payments?

As briefly mentioned above, estimated tax payments are required for those whose federal income and self-employment taxes are not automatically withheld from income.

With this in mind, estimated tax payments are typically required for the following individuals who expect to owe $1,000 or more upon filing their federal tax return:

Self-employed individuals
Sole proprietors
Freelancers
S-corporation shareholders
Independent contractors
Small business owners

Additionally, corporations that expect to owe more than $500 when filing their return also need to make estimated tax payments.

The federal tax system is considered “pay-as-you-go”, meaning that you must pay the federal government the taxes you owe as you earn income throughout the year. As a W-2 employee, this happens automatically as taxes are withheld from your paycheck. But as someone who runs their own business or works as a 1099 employee, this typically isn’t done for you.

If you fall into this category, you may think that you can just make one large payment at the end of the year based on what your tax bill turns out to be. However, this typically isn’t the case, and you may face underpayment penalties if you fail to make the required estimated tax payments throughout the year.

Are There Any Exceptions?

It’s important to note that there are certain exceptions. Fishers, farmers, and high-income payers may have special rules regarding their estimated tax payments. Refer to Publication 505, Tax Withholding and Estimated Tax, for more information on possible exceptions.

Another exception covers those who were U.S. citizens or resident aliens of the United States for the previous year, and had no tax liability. This means their tax bill was $0, or they didn’t file a tax return. If both these conditions apply, then you don’t need to make estimated payments.

What About Salaried or Hourly Employees?

In most cases, the federal income taxes for W-2 employees who earn a salary or hourly wage are already withheld from their paychecks, meaning they don’t owe estimated payments.

The net income they receive each pay period already includes a deduction for taxes, which is sent to the IRS on their behalf by the employer.

However, if a W-2 employee has a side hustle or makes significant income outside of their typical work (and they expect to owe at least $1,000), then they may be required to make estimated payments.

Need help determining if you owe estimated tax payments? Work with our tax accounting specialists to discuss your circumstances and create a strategic tax plan.

When Are Estimated Tax Payments Due?

Estimated taxes are due every quarter. The specific dates can vary from year to year, depending on when weekends and holidays fall. Here are the specific estimated tax payment deadlines that apply to the 2025 tax year.

April 15, 2025 (Quarter 1)
June 16, 2025 (Quarter 2)
September 15, 2025 (Quarter 3)
January 15, 2026 (Quarter 4)

Estimated tax payments on income earned in the corresponding quarter must be paid on or before these dates. When using the IRS online payment system, you can schedule out these payments ahead of time to ensure you don’t miss a deadline.

How to Calculate Your Estimated Tax Payments

If you’re required to make estimated tax payments on your income, you may not know how to calculate the payment amount. Do you pay a fixed amount for each quarter? Apply a certain percentage to your income? Go off of what you owed last year?

While this step can be a bit challenging, especially for those who are making estimated payments for the first time, the IRS provides some helpful guidance, and there is a worksheet included on the estimated tax payment form, 1040-ES.

Here are the general steps it lays out:

Find your expected annual income based on all sources of income.
Calculate your taxable income based on any adjustments, deductions, and credits you expect to take.
Determine the appropriate tax brackets and rates that apply to your circumstances.
Calculate your expected tax liability by multiplying your expected taxable income by the corresponding tax rate for self-employment and income taxes.
Divide this total liability by four, giving you the quarterly estimated tax payment amount.

As the IRS explains, it may be useful to use your previous year’s return if you don’t know where to start. Just remember that if you end up underpaying, you may face penalties when filing your annual tax return, even if you’re owed a refund.

Example of Paying Estimated Taxes

Let’s say you run a graphic design business as a sole proprietor, and you don’t have any other sources of income. Last year, you earned $85,000, and you expect to earn about the same amount this year.

You pay $4,500 per year for a coworking space and another $2,000 for software licenses to run your business. Thus, your total business expenses total $6,500. Using these estimations, we can calculate your taxable income for the current year as $78,500.

You’ll owe both self-employment tax and income tax. The applicable self-employment tax rate is 15.3%, which includes 12.4% for Social Security and 2.9% for Medicare. As per IRS guidelines, 92.35% of your net earnings (not 100%) are subject to this tax. We can calculate this as:

$78,500 * 0.9235 = $72,494.75

From there, we apply the self-employment tax rate to this value:

$72,494.75 * 0.153 = $11,091.70

For the whole year, it’s estimated that you’ll owe $11,091.70 in self-employment tax. Now, for the federal income tax portion.

We first need to find the adjusted gross income (AGI) for the year, which we can calculate by deducting the “employer” portion of the self-employment tax from the estimated gross income.

$11,092 / 2 = $5,546

$78,500 - $5,546 = $72,954

Using the AGI of $72,954, we then need to consider the taxable income for the year, which we find by subtracting the standard deduction amount from this value. For a single filer in 2025, this amount is $14,200. Here’s how we find the taxable income:

$72,954 - $14,200 = $58,754

Since we have progressive tax rates on income in the United States, the following are the applicable tax rates for this amount:

10% on income up to $11,600

0.10 * $11,600 = $1,160

12% on income between $11,601 and $47,150

($47,150 - $11,601) * 0.12 = $4,265.88

22% on income between $47,151 and $100,525

($58,754 - $47,151) * 0.22 = $2,552.66

Summing these values gives us the total income tax you’d owe for the year:

$1,160 + $4,266 + $2,553 = $7,978.54

Finally, we can add the estimated income tax to the self-employment tax, and divide this value by four to find the estimated tax payment you should send to the IRS each quarter.

($7,978.55 + $11,091.70) / 4 = $4,767.56

How to Make Estimated Tax Payments

It’s relatively straightforward to make your estimated tax payment, even if it takes a bit of work to calculate the amount accurately.

The IRS allows you to send the payment online or by mail using Form 1040-ES. You can also pay over the phone or use the IRS2Go app from your mobile device.

You can break the payments down into weekly, bi-weekly, or monthly payments if you wish; you just need to make sure you pay the full amount by the deadline for each quarter.

What Happens If You Miss a Payment?

Curious what are the penalties for not paying estimated taxes? The IRS will generally impose penalties if you fail to make required estimated payments or if you underpay. Again, there are certain exceptions that apply here, and penalties may be waived in certain circumstances.

Failure to make the payment will automatically result in a penalty. However, the specific amount you’ll owe depends on how much you underpaid, how long the payment was late, and the interest the IRS is currently charging.

Conclusion

Making estimated tax payments helps self-employed individuals, freelancers, and business owners spread their tax liability throughout the year and ensure compliance with IRS requirements.

For those who need help determining if they need to make estimated tax payments or aren’t sure of the amount they need to pay, reach out to the expert team at Bob's Bookkeeper’s. Our team has worked with founders and business owners across a number of industries, and we’re proud to offer tailored tax guidance to suit each client’s unique needs.

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