Why quarterly estimated taxes exist
When you have a regular job, your employer withholds federal income tax + payroll tax from each paycheck and sends it to the IRS on your behalf. As a self-employed person, nobody does that for you. The IRS still expects to be paid throughout the year, not in one lump on April 15 — so you make quarterly estimated payments via Form 1040-ES.
Who's required to make estimated payments?
Per IRC § 6654, you must make estimated payments if both:
- You expect to owe $1,000 or more in federal tax for the year (after withholding from any W-2 jobs and refundable credits), AND
- Your withholding + credits won't cover at least 90% of this year's tax OR 100% of last year's tax (110% if last year's AGI was over $150k — known as the safe harbor rule).
Rule of thumb: if you expect net self-employment income above roughly $5,000-$6,000 for the year and have no W-2 withholding, you almost certainly need to be paying quarterly. Below that, you might be under the $1,000 threshold and can pay it all in April.
What happens if you miss a deadline?
The IRS charges an underpayment penalty for each quarter you were short. It's not a flat fee — it's calculated as interest on the missing amount, from the original due date until the date you pay (or April 15 of the following year, whichever comes first). The rate is the federal short-term rate + 3% — currently around 8% APR.
Use the tax penalty estimator if you've already missed one and want a rough sense of the damage.
How to actually pay
- IRS Direct Pay (free, online, takes 5 minutes): irs.gov/payments/direct-pay
- EFTPS (free, requires enrollment): eftps.gov
- Debit/credit card via an IRS-approved processor (small fee, ~2% for credit cards).
- Check or money order mailed with Form 1040-ES voucher.
The state side
Most states with income tax mirror the federal quarterly schedule. No-income-tax states (AK, FL, NV, NH, SD, TN, TX, WA, WY) require no state estimated payments. Some states have slightly different deadlines or different thresholds — check your state's Department of Revenue if you're not sure.