Quarterly Estimated Tax (Form 1040-ES): Who Pays, How Much, When

Do I have to pay quarterly taxes on 1099 income?

You generally must pay estimated tax if both apply (Form 1040-ES):

• the tax you expect to owe for the year, after withholding and refundable credits, is at least $1,000; and
• your withholding and refundable credits will fall short of the "safe harbor" target (below).

It covers any income without withholding: self-employment and gig profit, interest, dividends, rent, gains from selling stocks or other assets, prizes and awards (Publication 505). There is no separate minimum per 1099, and it does not matter whether a client sends one: what counts is the tax on your income. Estimated tax covers self-employment tax too, which applies once net earnings from self-employment reach $400, at 15.3% on 92.35% of net profit (the Social Security part stops at a yearly earnings cap).

If estimates are required, withholding plus payments that reach the same target by each due date generally avoid the penalty. If you have a job or a pension, more withholding can take the place of estimated payments.

A case is simple when your income is steady, you filed last year's return and you pay on time. It needs judgment when:

• last year's return was not filed, or you are behind on several years;
• income is lumpy: a big sale, a late contract, a business that peaks in one season;
• you moved to the US or became a resident this year or last year (see first year as a US tax resident), or you live abroad (see filing while living abroad);
• you live and work in different states, or owe state estimates too;
• you already received a penalty notice and want to request a waiver.

Gather last year's return, this year's profit to date from your books or 1099s, your pay stubs or pension statements showing federal withholding, and confirmations of every payment made so far.

What are the quarterly estimated tax due dates, and which months does each cover?

Four due dates, and the payment periods are not equal quarters (IRS). Under the safe harbors each payment is one-quarter of the target; the periods matter if you use the annualized method (below).

A due date on a Saturday, Sunday or legal holiday moves to the next business day. You can skip the fourth payment if you file the year's return by February 1, 2027 and pay the whole balance with it (Form 1040-ES). You may also pay weekly or monthly, as long as enough is in by each due date (IRS).

If you first earn income subject to estimates after March 31, your first payment is due by that period's date (Publication 505, Table 2-1). The regular method still counts a quarter of the year's target as due in April, so to avoid a penalty for the earlier period, figure the payments with the annualized method (below) and file Form 2210 with its annualized income schedule, even if no penalty is owed (Form 1040-ES). Mailed payments: the IRS warns that the postmark date is the date the postal facility processes the envelope, which may be later than the day you drop it off.

How much should I pay each quarter? The safe harbor: 90%, 100% or 110%

The safe harbor is the smaller of two targets, this year's tax or last year's tax (raised for higher incomes), paid in four equal parts through withholding and estimated payments combined. It is set by 26 U.S.C. 6654(d):

The last-year target is the one you can know in advance: divide it by four, subtract the withholding expected for each quarter, and pay the rest by each date. Any tax above the target is due with the return in April, without an estimated tax penalty.

"Tax" here is income tax plus self-employment tax, the net investment income tax and any Additional Medicare Tax not withheld, minus credits other than withholding (26 U.S.C. 6654(f), (m)); household employment taxes count too if you have withholding or must pay estimates anyway (Publication 505). To estimate this year's figure, use the worksheet in the Form 1040-ES package.

Two things catch people. The penalty is figured separately for each due date, so a big December payment does not cure an April shortfall, and you can owe it even if you get a refund (Form 2210 instructions). And if you did not file last year's return, the last-year target is not available at all.

Married couples can pay joint estimates unless they are legally separated, have different tax years, or either spouse is a nonresident alien who has not elected resident status. Registered domestic partners and civil-union partners who are not married under state law cannot pay jointly; each gets credit only for their own payments. Paying jointly or separately does not bind your filing status (Publication 505).

Do I owe estimated tax in my first year of self-employment?

There is no first-year exemption, but one exception often covers it. You owe no estimated tax penalty for the year if your previous year covered 12 months, you were a US citizen or resident all of that year, and you had no tax liability for it: total tax was zero, or you did not have to file (26 U.S.C. 6654(e)(2)). The full tax, including self-employment tax, is still due with the return.

If you had any tax last year, for example from a job you left, the last-year target applies. It is often reachable because it uses last year's smaller tax, and any withholding this year, for example from a job held early in the year, counts toward it.

My income came late in the year, like a big capital gain: can I pay less in the early quarters?

Yes, with the annualized income installment method. It sets each payment from the income actually received by the end of that period, so a gain in November first raises the January payment (Publication 505). What you skip early is made up in later payments once the income arrives (26 U.S.C. 6654(d)(2)). If you use it, you must attach Form 2210 and its annualized income schedule to your return, even if no penalty is owed.

It fits freelancers with a slow first half and a strong fall, and investors who sell late. For a large bonus or carried interest instead, see estimated tax in a big bonus year.

Can withholding from my W-2 job, my spouse's job or a retirement distribution cover my side income?

Yes, if the total withheld reaches a safe harbor. All federal income tax withheld counts, as does excess Social Security tax withheld when you had two or more employers (Form 2210 instructions). Withholding is treated as paid in four equal parts on the four due dates unless you choose to show the actual dates (26 U.S.C. 6654(g)). An estimated payment counts only from the day you make it.

That makes withholding the one tool that fixes earlier quarters: extra withholding taken in the fall is spread back over the whole year. Sources you can raise:

• wages, with a new Form W-4 (see withholding for two jobs or two earners);
• a pension or annuity, with Form W-4P;
• an IRA withdrawal or other one-time retirement payout, with Form W-4R;
• certain government payments, such as Social Security benefits, with Form W-4V (Form 1040-ES).

On a joint return, the withholding of both spouses counts. S corporation owners have their own options: see S corporation estimated tax payments.

I missed a quarterly estimated tax payment: should I pay now or wait?

Paying sooner costs less: the penalty runs for each day the shortfall stays unpaid, until you pay it or the April return due date, whichever comes first (26 U.S.C. 6654(b)).

Any payment goes first to the oldest unpaid installment, whatever quarter you name on it (Form 2210 instructions). So if you missed April and pay only the June amount in June, the payment fills April's gap and June is now short. Covering both needs the missed amount plus the current one.

Other ways to limit it:

• raise withholding for the rest of the year, which counts as paid evenly;
• if your income was low early in the year, the annualized method may show you owed little for the missed period;
• refigure the remaining payments with Worksheet 2-12 in Publication 505 if your income changed.

How is the underpayment penalty figured, and do I file Form 2210?

The penalty works like interest: the IRS underpayment rate (7% for the current quarter, reset quarterly per the IRS) times each quarter's shortfall, for the days it stayed unpaid (26 U.S.C. 6654(a)). There is no penalty if the tax on your return, minus withholding, is under $1,000.

Most people do not file Form 2210. Leave the penalty line blank and the IRS figures it and sends a bill, unless you check box B, C or D, which means figuring the penalty yourself; if you file by the April due date and pay the bill by the date on it, no interest is charged on the penalty (Form 2210 instructions).

Can the underpayment penalty be waived for retirement, disability or a disaster?

It can be, in two cases set by 26 U.S.C. 6654(e)(3), if the IRS finds the conditions met. Outside them, the IRS says this penalty generally cannot be waived for reasonable cause.

For a federally declared disaster, the IRS applies relief automatically by county, so generally do not file Form 2210 for that reason (Form 2210 instructions). If a penalty notice has already arrived, the IRS asks for a written explanation signed under penalty of perjury, sent to the address on the notice.

How do I pay estimated tax, and can last year's refund or extension payment count?

You can pay online or by mail. The IRS lists your IRS online account, Direct Pay from a bank account (no fee), EFTPS (no fee, enrollment needed), a debit or credit card or digital wallet (processor fee), or a check or money order with a Form 1040-ES voucher, payable to "United States Treasury." Choose estimated tax and the right tax year.

Last year's refund can be applied instead of paid out: enter the amount on last year's return. If you file on time, the credit counts as paid on the April due date (Publication 505). Once credited, it cannot be refunded until you file the next return. A payment sent with an extension request counts toward last year's tax; if last year's return then shows an overpayment, you can credit that the same way. The Form 2210 instructions treat such a credit as paid on the April due date when last year's tax was fully paid by then, and as paid on the actual payment date when the payment came later.

States run their own estimates, with their own dates and targets; California, for example, splits its required payment unevenly and asks for nothing in September (FTB). For more than one state, see remote work and state income tax.

Example

Illustrative figures in US dollars.

Rideshare driver with a W-2 spouse

A married couple files jointly both years. Their joint tax last year was 8,000 on AGI of 90,000, so their target is 100% of last year's tax: 8,000. This year the spouse's withholding will be 6,000, counted as 1,500 per quarter, and the driver nets 30,000. They need 2,000 more: 500 by each of the four due dates. With 2,000 paid on time, whatever tax the year's return shows above 8,000 is due in April without an estimated tax penalty.

A late-year stock sale

A single investor's tax last year was 20,000 on AGI of 160,000, so the last-year target is 110%: 22,000. In November the investor sells shares for a 200,000 gain.

• Paid 5,500 by each due date: no penalty, though this year's tax is far higher. The rest is due in April.
• Paid less early with the annualized method: each of the first three payments is set by the income actually received by March 31, May 31 and August 31, so the investor's other income (or the withholding on it) still has to cover them; the gain falls in the September to December period and first raises the January payment.

First year freelancing after a zero-tax year

A US citizen's full-year return last year showed no total tax: the citizen earned wages abroad, all covered by the foreign earned income exclusion. (Self-employment income abroad would still owe self-employment tax, so total tax would not be zero.) This year the citizen freelances and nets 40,000. The no-liability exception applies, so there is no estimated tax penalty this year. The full tax, including self-employment tax, is due with the return, and estimates start next year.

Different for you?

• You own an S corporation: see S corporation estimated tax payments.
• A large bonus or carried interest drives the bill: see estimated tax in a big bonus year.
• You want withholding to cover side income or a second earner: see withholding for two jobs or two earners.
• You are a nonresident alien with US business income: see nonresident returns for business income.
• You are self-employed and live abroad: see self-employment tax abroad.
• Several years are unfiled, or you cannot pay the balance: see catching up on unfiled returns and get individual tax help.
• You live and work in different states: see remote work and state income tax.
• Your business profit is uneven, or you want a waiver: the annualized method and waiver statement take judgment; get individual tax help.
• At least two-thirds of your gross income, this year or last year, is from farming or fishing: a lower target applies, with one payment due in January, or none if you file and pay by March 1 (Publication 505); get individual tax help.