- By the dedicated team of editors and writers at Newsletter Station.
Taxes aren't always something you settle once a year when you file your return. For many taxpayers, the IRS requires them to pay taxes throughout the year as income is earned or received. Employees generally handle this through paycheck withholding, while people with income that isn't subject to enough withholding may need to make estimated tax payments.
Estimated taxes can apply to self-employed workers, business owners, investors, retirees, and others. Knowing whether you need to make payments—and how much can help you avoid an unexpected tax bill or an underpayment penalty.
Who May Need to Pay Estimated Taxes?
Self-Employed Individuals
Freelancers, independent contractors, consultants, sole proprietors, and other self-employed individuals commonly need to consider estimated taxes because federal income tax generally isn't withheld from their business payments.
Self-employed individuals may also owe self-employment tax, which covers Social Security and Medicare taxes. Estimated tax payments can cover both income and self-employment taxes.
For most individuals, you may need to make estimated payments if you expect to owe at least $1,000 in federal tax after subtracting withholding and refundable credits, and your withholding and credits aren't enough to meet the IRS's required payment threshold.
Independent Contractors and Gig Workers
Receiving a Form 1099 instead of a paycheck with tax withheld doesn't automatically mean you owe estimated taxes, but it signals you should review your situation.
Freelancers, consultants, rideshare drivers, delivery workers, and other gig workers may receive income without federal tax withholding. Setting aside part of each payment can help prevent a cash-flow problem when taxes are due.
Your income may also change considerably from one quarter to the next. If you have a particularly strong month or receive a large project payment, don't assume the estimate you calculated earlier in the year is still appropriate.
People With Significant Investment Income
Interest, dividends, capital gains, rental income, and other taxable income can increase your tax liability.
A large investment sale is a good example. If you sell an investment for a substantial taxable gain and little or no tax was withheld, you may need to make an estimated payment. The IRS specifically notes that a sizable capital gain can create an estimated tax obligation.
Reviewing investment activity throughout the year is generally more useful than waiting until tax preparation begins.
Retirees Receiving Income Without Enough Withholding
Retirement doesn't necessarily mean you no longer need estimated tax payments.
Pension and annuity payments may have federal income tax withheld, but you generally choose how much is withheld. Distributions from traditional IRAs, 401(k)s, and other retirement accounts can also be taxable.
If you're taking larger withdrawals than in previous years, check whether your withholding is sufficient. In some cases, increasing withholding from retirement income may be an alternative to making quarterly estimated payments.
People With Irregular or Seasonal Income
Business owners, sales professionals, commission-based employees, seasonal workers, and others with uneven income can have a harder time predicting their annual tax liability.
The good news is that estimated tax calculations don't have to remain fixed for the entire year. If your income, deductions, or credits change significantly, you can recalculate your expected tax and adjust future payments.
Special rules may apply when you earn most of your income during certain parts of the year. For example, farmers and fishermen have different estimated tax rules.
Higher-Income Taxpayers
Higher-income taxpayers need to pay particular attention to the estimated tax safe-harbor rules.
Generally, taxpayers can avoid an estimated tax penalty by paying enough through withholding and timely estimated payments to meet the applicable threshold. For 2026, the general rule is to pay at least 90% of the current year's tax or 100% of the prior year's tax, whichever is less. If your prior-year adjusted gross income was more than $150,000—or $75,000 if married filing separately—the prior-year threshold generally increases to 110%.
These rules can help when your current-year income is hard to predict, but they don't necessarily mean paying the safe-harbor amount will eliminate the balance you owe when you file.
Small Business Owners
Business owners may need to make estimated tax payments depending on how their business is structured and how much taxable income they receive.
Sole proprietors, partners, and many S corporation shareholders generally report their share of business income on their individual tax returns, which can create an individual estimated tax obligation. Corporations have separate estimated tax requirements; for example, corporations generally must make estimated payments if they expect to owe $500 or more when they file.
It's important to distinguish between payments made by the business and estimated payments made by an individual owner. The rules depend on the business structure and the type of tax involved.
When Are Estimated Tax Payments Due?
For most individuals who use the calendar year, federal estimated tax payments are generally due:
April 15
June 15
September 15
January 15 of the following year
For the 2026 tax year, the scheduled dates are April 15, June 15, September 15, 2026, and January 15, 2027. If a due date falls on a weekend or legal holiday, the payment is generally due the next business day.
These aren't simply four equal three-month periods. The IRS divides the tax year into specific payment periods. If you don't start receiving income subject to estimated tax until later in the year, your first payment may be due later.
How Much Should You Pay?
Estimated tax isn't necessarily your previous year's tax bill divided by four.
Your calculation can be affected by current-year income, deductions, tax credits, withholding, self-employment tax, investment gains, and other factors. Form 1040-ES provides a worksheet to help individuals calculate estimated payments.
Your previous tax return can be a useful starting point, particularly when your income hasn't changed substantially. But if you've started a business, sold an investment, retired, received a large bonus, or experienced another major financial change, your current-year estimate may look very different.
One common mistake is waiting until the end of the year to discover that withholding and estimated payments weren't sufficient. Another is continuing to make the same estimated payment after your income has changed substantially.
Don't Forget About Withholding
Estimated tax payments aren't the only way to meet your federal tax obligations during the year.
If you have wages, you may be able to increase the amount withheld from your paycheck by submitting a new Form W-4 to your employer. The IRS also notes that withholding from certain retirement payments and other income can sometimes be adjusted.
For some taxpayers, increasing withholding may be simpler than making separate quarterly payments. The right approach depends on the types and amounts of income you receive.
What Happens If You Pay Too Little?
Underpayment can result in an IRS penalty, even if you ultimately pay your entire tax balance when you file your return. The estimated tax rules generally look at whether you paid enough tax during the year and whether you made required payments on time.
Exceptions and special rules apply, so an underpayment doesn't automatically mean a penalty. Farmers and fishermen, for example, face different requirements, and some taxpayers may qualify for penalty exceptions.
Make Estimated Taxes Part of Your Financial Plan
Estimated taxes are essentially a way of paying federal taxes as income is earned rather than waiting until tax filing season. For self-employed people or those with substantial income outside a regular paycheck, planning for these payments can make a big difference in cash flow.
Review your estimated tax calculation whenever your financial situation changes. A new business, significant investment gain, retirement, major change in income, or large deduction can all affect what you should be paying.
The IRS provides Form 1040-ES and online payment options to help taxpayers calculate and make estimated payments. If you're unsure whether estimated taxes apply to you or how much you should pay, a qualified tax professional can help you evaluate your particular situation.
Planning is generally easier than discovering at tax time that you didn't set aside enough money to cover your tax liability.
