If you're self-employed, a freelancer, or have significant income not subject to withholding, you're likely required to make quarterly estimated tax payments. Understanding how to calculate and submit these payments is crucial for avoiding penalties and maintaining good standing with the IRS.

Who Must Make Estimated Tax Payments?

You generally need to make estimated tax payments if you expect to owe at least $1,000 in taxes when you file your return, and your withholding and refundable credits will be less than the smaller of:

• 90% of the tax shown on your current year's tax return, or
• 100% of the tax shown on your prior year's return (110% if your adjusted gross income was more than $150,000, or $75,000 if married filing separately)

This typically applies to self-employed individuals, independent contractors, gig economy workers, landlords with rental income, investors with significant capital gains, and anyone with substantial income from sources that don't withhold taxes.

2026 Quarterly Payment Due Dates

The IRS divides the tax year into four payment periods, each with specific due dates. Missing these deadlines can result in penalties, even if you're due a refund when you file your annual return.

• First Quarter (January 1 - March 31): Due April 15, 2026
• Second Quarter (April 1 - May 31): Due June 16, 2026
• Third Quarter (June 1 - August 31): Due September 15, 2026
• Fourth Quarter (September 1 - December 31): Due January 15, 2027

If a due date falls on a weekend or legal holiday, the deadline moves to the next business day. Mark these dates on your calendar and set reminders to avoid late penalties.

How to Calculate Your Estimated Tax Payments

Calculating estimated taxes involves projecting your annual income, deductions, and credits. Here's a step-by-step approach:

Step 1: Estimate Your Adjusted Gross Income (AGI)

Project your total income for the year from all sources: self-employment income, wages, interest, dividends, rental income, and capital gains. Subtract above-the-line deductions like self-employment tax deduction, health insurance premiums (if self-employed), and retirement contributions.

Step 2: Calculate Your Taxable Income

Subtract either the standard deduction ($15,000 for single filers, $30,000 for married filing jointly in 2026) or your itemized deductions if they exceed the standard deduction. This gives you your taxable income.

Step 3: Determine Your Tax Liability

Apply the current tax rates to your taxable income. For 2026, tax brackets range from 10% to 37% depending on your income level and filing status. Don't forget to add self-employment tax (15.3% on net self-employment income up to $168,600, plus 2.9% on amounts above that threshold).

Step 4: Account for Credits and Withholding

Subtract any tax credits you're eligible for (child tax credit, education credits, etc.) and any taxes already withheld from wages or other income. The remaining amount is what you need to pay through estimated taxes.

Step 5: Divide by Four

Divide your total estimated tax by four to determine your quarterly payment amount. However, if your income fluctuates throughout the year, you may want to use the annualized income installment method to pay based on actual quarterly income rather than equal payments.

Methods for Paying Estimated Taxes

The IRS offers several convenient ways to make estimated tax payments:

• IRS Direct Pay: Free online payment directly from your bank account at irs.gov/payments
• Electronic Federal Tax Payment System (EFTPS): Free service requiring enrollment, allows scheduling payments in advance
• Credit or Debit Card: Accepted through IRS-approved payment processors (convenience fees apply, typically 1.87-1.99%)
• Mail: Send Form 1040-ES with a check or money order to the appropriate IRS address for your state
• Same-Day Wire: Available through your financial institution for urgent payments

Electronic payments are faster, more secure, and provide immediate confirmation. If you mail a payment, send it well before the due date to ensure timely receipt.

Avoiding Underpayment Penalties

The IRS charges an underpayment penalty if you don't pay enough tax throughout the year. The penalty is calculated based on the amount underpaid and the number of days it was underpaid. Current penalty rates are around 8% annually, adjusted quarterly.

You can avoid penalties by meeting one of these safe harbors:

• Pay at least 90% of your current year's tax liability
• Pay 100% of your prior year's tax liability (110% if your AGI exceeded $150,000)
• Owe less than $1,000 after subtracting withholding and credits

If your income varies significantly throughout the year, consider using the annualized income installment method (Form 2210, Schedule AI) to base payments on actual quarterly income rather than equal installments.

Special Considerations for Different Business Structures

Sole Proprietors and Single-Member LLCs

Report business income on Schedule C and pay both income tax and self-employment tax through estimated payments. Remember that self-employment tax is 15.3% on net earnings, covering both the employer and employee portions of Social Security and Medicare taxes.

Partnerships and Multi-Member LLCs

The business files Form 1065 but doesn't pay taxes. Partners receive K-1s showing their share of income and make estimated payments on their individual returns. Partners also pay self-employment tax on their distributive share of partnership income.

S Corporations

Shareholders receive reasonable compensation (subject to withholding) plus distributions. Estimated payments are needed for the distribution portion, which is subject to income tax but not self-employment tax. The corporation files Form 1120S, and shareholders receive K-1s.

C Corporations

The corporation itself makes estimated tax payments using Form 1120-W. Shareholders only pay tax on dividends received, which may require estimated payments if dividends are substantial.

Adjusting Payments Mid-Year

Life changes and business fluctuations happen. If your income increases or decreases significantly, adjust your remaining estimated payments accordingly. You're not locked into the amounts you initially calculated. It's better to adjust and pay the correct amount than to face penalties or overpay and tie up cash unnecessarily.

Common situations requiring mid-year adjustments include landing a large contract, losing a major client, significant investment gains or losses, marriage or divorce, birth or adoption of a child, or changes in deductible expenses.

Record Keeping and Documentation

Maintain detailed records of all estimated tax payments, including:

• Payment confirmation numbers
• Dates and amounts paid
• Copies of Form 1040-ES vouchers if paying by mail
• Bank statements showing electronic payments
• Worksheets showing how you calculated each payment

These records are essential when filing your annual return and invaluable if the IRS questions your payments or if you need to prove timely payment to avoid penalties.

State Estimated Tax Payments

Don't forget about state estimated taxes! Most states with income taxes require estimated payments following similar rules to federal requirements. Due dates often align with federal deadlines, but some states have different schedules. Check your state's department of revenue website for specific requirements, or consult with a tax professional familiar with your state's rules.

Working with a Tax Professional

Calculating estimated taxes can be complex, especially with multiple income streams, business expenses, and changing tax laws. A tax professional can help you accurately project your tax liability, identify deductions and credits you might miss, optimize your payment strategy, and ensure compliance with both federal and state requirements.

At MSN Taxes, we help business owners and self-employed individuals navigate estimated tax requirements throughout the year. We provide quarterly calculation services, payment reminders, and strategic tax planning to minimize your liability while avoiding penalties.