Quarterly Taxes: What They Are, Who Needs to File, and How to Get Them Right
If you’re self-employed, run a small business, or earn income outside of a traditional paycheck, quarterly estimated taxes are likely something you need to pay attention to. Skipping them can result in penalties, interest, or a surprise bill come tax season.
Here’s what you need to know about quarterly tax payments—what they are, who needs to pay them, when they’re due, and how to calculate them to avoid penalties and interest.
What Are Quarterly Taxes, and Who Needs to File Them?
Quarterly estimated taxes are advance payments made to the IRS to cover income that isn’t subject to withholding. This includes:
Self-employment or freelance income
Side jobs and gig work
Rental property income
Investment or dividend earnings
Business profits from partnerships or S corporations
You’re generally required to make estimated payments if you expect to owe $1,000 or more in taxes after subtracting withholding and credits. This applies whether you’re an individual with a side hustle or a full-time business owner.
When Are Quarterly Taxes Due?
Estimated tax payments are due four times each year on the following schedule:
1st Quarter Payment – April 15, 2025
2nd Quarter Payment – June 17, 2025 (adjusted for weekend)
3rd Quarter Payment – September 15, 2025
4th Quarter Payment – January 15, 2026
If the due date falls on a weekend or holiday, the deadline shifts to the next business day.
How to Estimate What You Owe and the Safe Harbor Rule
Method 1: Estimate Based on This Year’s Income
Start by projecting your income and expenses for the year. Then calculate your expected tax liability, including:
Federal income tax
Self-employment tax (typically 15.3%)
Any applicable state tax
Divide your estimated tax by four to get your quarterly payment amount.
Example:
If you expect to owe $24,000 in total tax for the year, each quarterly payment would be $6,000.
Method 2: Use the Safe Harbor Rule
If your income varies or you’re unsure how much you’ll make, the IRS allows a safe harbor to help avoid penalties:
Pay 100% of your prior year’s total tax (or 110% if your adjusted gross income was over $150,000)
Split that evenly across the four quarters
As long as you meet this threshold, you won’t face underpayment penalties—even if your actual tax liability ends up being higher.
What Happens If You Don’t Make Quarterly Payments?
If you don’t make your required estimated tax payments or you underpay, the IRS may charge penalties and interest, even if you pay the full amount by the time you file your return.
The Underpayment Penalty
This isn’t a flat fee. Instead, the IRS calculates it based on:
How much you underpaid
How long the payment was late
The IRS interest rate at the time (typically between 6–8%)
Penalties can add up quickly, especially for self-employed individuals with high net income. For example, if you underpay by $10,000 and the IRS rate is 7%, you could owe hundreds in interest and penalties—on top of your original tax bill.
You can be penalized even if:
You pay your full tax balance at the end of the year
You file your return on time
You simply missed one or two quarterly payments
The IRS assesses the penalty on each missed or short-paid quarter individually, so it’s not always obvious until you file your return.
How to Avoid It
Use the safe harbor rule to ensure you’re paying enough
Work with a CPA to fine-tune your estimated payments based on current-year income and deductions
Stay on top of the due dates to avoid late payments
Work With a CPA to Avoid Overpaying or Getting Penalized
Making estimated payments correctly isn’t just about avoiding IRS penalties. It’s also about keeping more of your money throughout the year.
As a licensed CPA, I help individuals and small business owners:
Accurately calculate quarterly tax payments
Avoid unnecessary penalties
Reduce overpayments by identifying eligible deductions
Stay compliant with IRS and state deadlines
Missing a deadline can lead to IRS penalties and interest. If you’re not sure how much to pay or want to avoid overpaying, I can help.
Michael Bottala, CPA
Email: michael@bottalacpa.com