Estimated Taxes: How to Pay & Avoid IRS Penalties
If you’re self-employed or earn income that isn’t subject to withholding, you may need to make quarterly estimated tax payments to the IRS. Here’s how to calculate, pay, and stay on top of estimated taxes.
What Are Estimated Taxes?
Estimated taxes are quarterly payments made to the IRS on income not subject to automatic withholding (e.g., self-employment, freelancing, rental income, investments).
If you expect to owe at least $1,000 in taxes after credits and withholding, you’re required to make estimated payments.
Who Needs to Pay Estimated Taxes?
✅ Self-employed individuals & freelancers ✅ Business owners & independent contractors ✅ Landlords with rental income ✅ Investors with capital gains or dividends ✅ Anyone with side hustle income
How to Calculate Your Estimated Tax Payment
You can estimate your taxes using:
- IRS Form 1040-ES (worksheet included).
- Your previous year’s tax return (aim to pay at least 100%-110% of last year’s tax liability).
- Online IRS Tax Withholding Estimator.
🔗 Need more help? Use our Tax Refund Calculator.
Estimated Tax Due Dates for 2024
| Quarter | Payment Due Date |
|---|---|
| Q1: Jan – Mar | April 15, 2024 |
| Q2: Apr – May | June 17, 2024 |
| Q3: Jun – Aug | Sept 16, 2024 |
| Q4: Sep – Dec | Jan 15, 2025 |
If the due date falls on a weekend or holiday, the payment is due the next business day.
How to Pay Estimated Taxes
- Online: IRS Direct Pay (bank transfer, credit/debit card).
- By Phone: Call the IRS for payment options.
- By Mail: Send a check or money order with Form 1040-ES.
- Electronic Federal Tax Payment System (EFTPS): Free online service for scheduling payments.
🔗 Learn more about IRS Tax Payment Methods.
What Happens If You Don’t Pay?
🚨 Failure to pay estimated taxes can result in:
- IRS penalties for underpayment.
- Interest charges on unpaid amounts.
- A surprise large tax bill when filing your return.
To avoid penalties, make sure to pay at least 90% of your current year’s tax liability or 100% of last year’s taxes (110% if earning over $150,000).
Final Thoughts
Estimated tax payments ensure you stay compliant and avoid costly penalties.
🚀 Ready to stay ahead? Check out our Filing & Paying Back Taxes Guide.