If no employer withholds tax for you, the IRS expects you to pay during the year through quarterly estimated taxes. Miss them and an underpayment penalty applies, even if you pay in full in April.
Who needs to pay
Generally anyone who expects to owe $1,000 or more for the year after withholding and credits: sole proprietors, partners, S corp shareholders with distributions, landlords and investors.
Due dates
- April 15 for income from January to March
- June 15 for April and May
- September 15 for June to August
- January 15 of the next year for September to December
When a date falls on a weekend or holiday, it moves to the next business day.
How much to pay: the safe harbors
You avoid the penalty if your payments plus withholding cover the smaller of:
- 90% of this year's tax, or
- 100% of last year's tax, or 110% if last year's adjusted gross income was over $150,000.
The prior-year safe harbor is the simplest: divide the target by four and pay it each quarter, then settle the balance in April.
Don't forget
- Self-employment tax is included in what you estimate.
- Most states with an income tax have their own estimated payments.
- Uneven income? The annualized method can reduce early-quarter payments.
Tools
Estimate your bill with our self-employment tax calculator. Our fractional CFO service builds estimated tax into your monthly cash plan so payments are never a surprise.
