Quarterly Estimated Taxes: A Plain-English Guide for Self-Employed Workers
Nobody sends you a tax bill when you work for yourself. You're expected to figure out what you owe and pay it four times a year, on a schedule that doesn't quite match the calendar. Miss it, or pay too little, and you owe a penalty at filing on top of the tax itself.
Here's how it works.
Why quarterly payments exist
When you're on a W-2, your employer withholds taxes from every paycheck. The IRS gets paid continuously throughout the year. When you're self-employed, nobody withholds anything. To avoid everyone waiting until April to collect an entire year's worth of tax, the IRS requires estimated payments throughout the year instead.
The system isn't punitive — it's just how the mechanics work without an employer in the middle. The penalty for underpaying is roughly 8% annualized on the shortfall, which is real money if you miss badly.
The four due dates
The dates are not quarterly in the calendar sense, which is genuinely annoying.
- Q1 (January 1 – March 31): due April 15
- Q2 (April 1 – May 31): due June 16
- Q3 (June 1 – August 31): due September 15
- Q4 (September 1 – December 31): due January 15
Q2 covers only two months. Q4 ends in December but isn't due until January. Nobody knows why it works this way. Set calendar reminders two weeks before each date so you're not scrambling.
Most states follow the federal schedule. A few don't — check your state's department of revenue site once and note the dates.
How much to pay
You have two options. Pay whichever is lower.
Option 1: 90% of this year's projected tax. Estimate your income for the year, calculate the full tax liability, pay 90% of it across the four quarters. If your income is variable, this requires guessing — and if you guess wrong, you may owe a penalty.
Option 2: 100% of last year's tax (the safe harbor). Find your total tax from last year's Form 1040, line 24. Pay that amount spread across four equal payments. If your prior year AGI exceeded $150,000, the threshold rises to 110% of last year's tax.
Safe harbor is the better option for most self-employed workers with variable income. You know exactly what last year's tax was. No guessing required. If you have a great year, you'll owe the difference at filing — but you won't owe a penalty on top of it.
What goes into the calculation
Your quarterly estimated tax has three components.
Self-employment tax is 15.3% on 92.35% of your net self-employment income. This covers both the employee and employer sides of Social Security and Medicare, since you're paying both. It's calculated before income tax, and half of it is deductible from your gross income when calculating federal and state income tax.
Federal income tax is applied to your taxable income after the standard deduction and the half-SE deduction. Use your effective rate — total federal tax divided by taxable income — not your marginal bracket.
State income tax works the same way. Nine states have no income tax at all: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.
The Quarterly Tax Estimator calculates all three, applies the safe harbor, and shows you each payment amount with the due date.
How to actually pay
EFTPS (eftps.gov) is the IRS's electronic payment system. Free, reliable, and keeps a record of every payment you make. Set it up once and use it for every quarterly payment.
IRS Direct Pay (directpay.irs.gov) works without registration — you just enter your bank info each time. Fine for occasional use, slightly more friction than EFTPS.
Check with Form 1040-ES still works if you prefer paper. Mail it to the address listed in the 1040-ES instructions for your state.
For state payments, search "[your state] estimated tax payment" — every state with income tax has an online portal.
What happens if you underpay
The IRS charges an underpayment penalty calculated at the federal short-term rate plus 3 percentage points, applied to the shortfall for each quarter. In 2026 that's roughly 7-8% annualized. It's not catastrophic, but it's an unnecessary cost.
You won't get a separate penalty notice in most cases. The penalty shows up on your return when you file, calculated on Form 2210. If you used safe harbor correctly, Form 2210 isn't required and the penalty doesn't apply.
The most common mistake
Spending the money.
A payment comes in, it hits your account, and it feels like income. A meaningful chunk of it belongs to the IRS and your state. Setting aside 25-30% of every payment into a separate savings account — immediately, not at the end of the quarter — is the single most practical thing you can do. Tax day becomes a transfer instead of a crisis.
Results from the Quarterly Tax Estimator are estimates for planning purposes. Actual tax depends on your deductions, credits, and final year-end income. Consult a CPA for precise quarterly estimates.