A Simple Guide to Estimated Quarterly Taxes

Who Needs to Pay Estimated Taxes?

If you earn income that doesn't have taxes withheld, the IRS expects you to pay as you go.

This includes:

• Self-employment income
• Freelance or contract work
• Rental income
• Investment gains
• Business profits

When Are They Due?

Estimated taxes are paid four times a year:

• Q1: April 15
• Q2: June 15
• Q3: September 15
• Q4: January 15 (of the following year)

How to Calculate What You Owe

There are two common approaches:

• Prior year method: Pay 100% of last year's total tax liability, divided into four payments. If your adjusted gross income was over $150,000, the safe harbor is 110% of last year's tax.
• Current year method: Estimate this year's income and calculate 90% of the expected liability.

The prior year method is simpler and avoids underpayment penalties as long as you meet the correct threshold.

What Happens If You Don't Pay

The IRS charges an underpayment penalty plus interest.

Even if you file on time, not paying quarterly can result in extra costs.

Common Mistakes

• Forgetting Q4 (it's due in January, easy to miss)
• Not adjusting estimates when income changes significantly
• Waiting until April to deal with it

Bottom Line

Quarterly taxes aren't optional for most self-employed people.

Staying on top of them avoids surprises and penalties at filing time.