Glossary

Quarterly Estimated Taxes

The IRS gets paid as you earn — four times a year. Form 1040-ES, IRC §6654, and a $1,000 trigger.

Quarterly estimated taxes are the four advance payments self-employed people make to the IRS during the year to cover income tax and self-employment tax — because no employer is withholding for them. The authority is IRC §6654 (“Failure by individual to pay estimated income tax”).

When they are required. You must make estimated payments if you expect to owe at least $1,000 in federal tax for the year after subtracting withholding and refundable credits (IRC §6654(e)(1)).

2026 due dates.

  • Q1: April 15, 2026 — for income earned January 1–March 31
  • Q2: June 15, 2026 — for April 1–May 31
  • Q3: September 15, 2026 — for June 1–August 31
  • Q4: January 15, 2027 — for September 1–December 31

Payments are remitted on Form 1040-ES or electronically via IRS Direct Pay or EFTPS.

The two safe harbors (IRC §6654(d)). You avoid the underpayment penalty if your total timely payments (withholding + estimateds) meet either:

  1. 90% of the current year’s tax, or
  2. 100% of the prior year’s tax — 110% if your prior-year AGI exceeded $150,000 ($75,000 if MFS) per IRC §6654(d)(1)(C).

The prior-year safe harbor is the cleaner planning target: you can calculate it precisely from last year’s Form 1040 line 24.

The penalty. Not a flat fine — interest at the federal short-term rate plus 3 percentage points, compounded daily, per quarter the payment was short. For Q1 2026 the IRS rate is 7% (Rev. Rul. 2025-22); Q2 2026 is 6% (Rev. Rul. 2026-5). A $5,000 even shortfall spread across all four quarters accrues approximately $318 in penalty for the year.

Worked example. Tomas nets $30,000 on Schedule C in 2026. His prior-year (2025) total tax was $3,200.

  • Income tax (after standard deduction & half-SE-tax deduction): ~$1,400
  • SE tax (from earlier glossary entry): $4,239
  • Total 2026 tax: ~$5,639

Using the prior-year safe harbor (his 2025 AGI was below $150K, so 100%): pay at least $3,200 evenly across four installments — $800 each quarter — to avoid penalty. He can still owe ~$2,400 at filing without penalty.

Using the current-year method: 90% × $5,639 = $5,075 / 4 = ~$1,269 per quarter.

The prior-year safe harbor is cheaper and certain. He pays $800 four times.

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