Quarterly estimated taxes: what they are and when to pay

If you’re self-employed, freelancing, or earning side income, the IRS expects you to pay taxes throughout the year — not just at filing time. These are called quarterly estimated tax payments, and missing them can result in penalties even if you pay the full amount by April.

Estimated taxes are due four times per year: April 15, June 15, September 15, and January 15 of the following year. You’ll use Form 1040-ES to calculate what you owe.

The simplest approach is the “safe harbor” rule: pay at least 100% of last year’s total tax liability, divided into four equal payments. If your income was under $150,000, this protects you from underpayment penalties regardless of how much you earn this year.

For higher earners (over $150,000 AGI in the prior year), the safe harbor threshold is 110% of last year’s tax. This is where quarterly planning with a CPA saves real money — overpaying estimated taxes is essentially giving the IRS an interest-free loan.

The better approach is to estimate your actual current-year income and calculate payments based on what you’ll really owe. This takes more effort but keeps your cash flow accurate. A CPA can help you set this up once and adjust it quarterly as your income picture becomes clearer.

If you’re new to estimated payments, start with the safe harbor method and refine from there. The penalty for underpaying is real but modest — it’s essentially interest on the underpaid amount. The bigger cost is the surprise tax bill in April when you realize you owe $10,000 or more.

Set calendar reminders for each deadline. Better yet, set up automatic payments through IRS Direct Pay or EFTPS. We set this up for all our self-employed clients during their first quarter with us.