When do I need to pay quarterly estimated taxes in the US?
You must make quarterly estimated tax payments if you expect to owe at least $1,000 in federal tax after withholding and credits. The 2024 due dates are April 15, June 17, September 16, and January 15, 2025.
Detailed Explanation
Quarterly estimated tax payments are required for self-employed individuals, business owners, and investors who receive income that is not subject to employer withholding. Missing or underpaying estimated taxes results in an underpayment penalty, even if you ultimately pay all your taxes when you file your return.
Who must make estimated tax payments?
You generally must pay estimated taxes if: - You expect to owe at least $1,000 in federal income tax after withholding and credits - Your withholding and credits will cover less than 90% of your current year tax liability, OR less than 100% of the prior year tax shown on your return (110% if your prior year AGI exceeded $150,000)
This applies to: - Self-employed individuals (sole proprietors, single-member LLCs) - Partners in partnerships - S-Corp shareholders receiving distributions - Freelancers, gig workers, and independent contractors - Investors with significant capital gains or dividend income - Rental property owners
The 2024 quarterly estimated tax due dates
| Period | Due Date | |---|---| | January 1 - March 31 | April 15, 2024 | | April 1 - May 31 | June 17, 2024 | | June 1 - August 31 | September 16, 2024 | | September 1 - December 31 | January 15, 2025 |
Note: these are federal deadlines. Most states with income tax have their own quarterly estimated payment requirements, often on the same dates but sometimes different.
How to calculate your estimated tax payment
You can use one of two approaches:
Method 1: Prior year safe harbor Pay the same amount you paid in total federal income tax last year, divided by 4. If your prior year AGI was over $150,000, pay 110% of last year's tax divided by 4. If you do this, you are guaranteed no underpayment penalty regardless of your actual current year liability.
This method is predictable and simple. The downside is that if your income has dropped significantly, you are overpaying and giving the IRS an interest-free loan.
Method 2: 90% of current year estimate Estimate your current year income and calculate 90% of the expected tax liability, then pay that in four equal installments. This requires you to forecast your income accurately each quarter.
Using Form 1040-ES
Form 1040-ES includes worksheets to calculate your estimated tax. You pay using IRS Direct Pay, the Electronic Federal Tax Payment System (EFTPS), by check with the payment voucher, or through your tax software.
Underpayment penalty
The underpayment penalty is calculated using the IRS underpayment rate, which is the federal short-term rate plus 3 percentage points. For 2024, the rate is approximately 8%. The penalty applies to each quarter independently, so even if you pay on time in Q3 and Q4, an underpayment in Q1 can generate a penalty for that quarter's shortfall.
The penalty is calculated on Form 2210. It is typically modest for most taxpayers (a few hundred dollars) but can be significant for large underpayments.
State estimated taxes
Most states with a personal income tax require quarterly estimated payments on a similar schedule. State rates and safe harbor rules vary — for example, California requires estimated payments if you owe $500 or more, with due dates on April 15 (40%), June 17 (0%), September 16 (30%), and January 15 (30%) — a different weighting than federal. Always check your specific state requirements.
S-Corp shareholders
S-Corp shareholders must pay estimated taxes on their share of S-Corp income (shown on Schedule K-1), even though the S-Corp itself does not pay federal income tax. The salary component is subject to withholding through payroll, but the pass-through income from K-1 is not. If K-1 income is substantial, quarterly estimated payments are required on the tax owed on that income.
Source: IRS Estimated Taxes
Real-World Examples
Freelancer using the prior year safe harbor
A graphic designer paid $18,000 in federal income tax in 2023. Using the prior year safe harbor, she makes four quarterly payments of $4,500 in 2024 regardless of how her business performs. Her actual 2024 liability turns out to be $24,000, but she owes no underpayment penalty because she satisfied the prior year safe harbor. She pays the $6,000 balance when she files by April 15, 2025.
Seasonal business with uneven income
A landscape contractor earns 80% of revenue April through September. He makes small Q1 payments (January-April) and larger payments for Q2 and Q3. Rather than paying equal installments based on last year's tax, he uses the annualised income method (Form 2210 Schedule AI) which allows unequal payments matched to his actual income pattern, avoiding large overpayments in Q1.
Common Mistakes to Avoid
- Not making Q1 estimated payments because the year has just started and income is uncertain — if you underpay Q1, a penalty accrues from April 15, even if you overpay later quarters.
- Forgetting that estimated payments must cover BOTH income tax and self-employment tax — many first-year self-employed people estimate only income tax and are surprised by the SE tax bill.
- Using last year's tax as a safe harbor without checking whether your AGI exceeded $150,000 — at that income level, you must pay 110% of prior year tax (not 100%) to avoid the underpayment penalty.
- Missing the January 15 fourth-quarter deadline because it falls after the holiday period — put a calendar reminder in December.
Frequently Asked Questions
What is the underpayment penalty rate for 2024?
The IRS underpayment rate for individuals in 2024 is the federal short-term interest rate plus 3 percentage points. As of Q1 2024, this is approximately 8%. The penalty is assessed on the underpaid amount for each day it is late and is calculated on Form 2210. It is relatively modest for most taxpayers but adds up quickly on large underpayments.
Do I owe estimated taxes if I had no income last year?
If you owed $0 in federal tax last year, the prior year safe harbor means you owe $0 in estimated payments for the current year. However, if your current year income is substantial, you should still make payments to avoid a large lump-sum liability at filing. The safe harbor prevents the penalty but does not eliminate the ultimate tax obligation.
Can my spouse's withholding cover my self-employment tax?
Yes. If your spouse has a W-2 job with significant withholding, you can increase their W-4 withholding to cover your SE income tax. Withholding is treated as paid evenly throughout the year, which can be more flexible than quarterly estimated payments. File a new W-4 with your spouse's employer to adjust the withholding amount.
What is EFTPS and how do I use it?
The Electronic Federal Tax Payment System (EFTPS) is the IRS's free online payment system for federal taxes. You enrol once, then make payments online or by phone. Payments can be scheduled up to 365 days in advance. Most business owners use EFTPS for estimated taxes because it provides a clear payment record and confirmation number.
Practical Tips
- Use the prior year safe harbor rule for peace of mind — paying exactly 100% (or 110% if AGI over $150,000) of last year's tax in four equal installments guarantees no underpayment penalty, regardless of how well your business performs.
- Set up EFTPS in January of each year and schedule all four quarterly payments on the same day — automated payments mean you will never miss a deadline.
- Set aside 30-35% of every invoice payment into a dedicated tax savings account — when estimated tax deadlines arrive, the money is already waiting.
- If your income is highly variable, explore the annualised income method (Form 2210 Schedule AI), which allows you to base each quarterly payment on your actual income through that date rather than equal installments.
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