Avoid the IRS underpayment penalty. Know exactly what to set aside each quarter — and when the four deadlines are — before they sneak up on you.
You're required to pay estimated taxes if you expect to owe at least $1,000 for the year after subtracting withholding and credits. The IRS charges a penalty (currently around 8% annualized) on underpayments — even if you pay everything when you file in April.
To avoid any penalty, you can use the "safe harbor" rule: pay at least 100% of last year's tax liability (110% if your prior year AGI exceeded $150,000). This calculator estimates your current-year liability — compare it to last year's to choose the safer path.
You're required to make quarterly estimated payments if you expect to owe $1,000 or more in federal tax for the year and your withholding doesn't cover at least 90% of your current-year tax or 100% of last year's tax. This applies to freelancers, independent contractors, small business owners, investors with significant dividend or capital gains income, and anyone with substantial income outside of W-2 employment.
To guarantee you avoid any underpayment penalty, pay at least 100% of last year's total federal tax liability (110% if your prior-year AGI exceeded $150,000) spread across four quarterly payments. This "safe harbor" protects you even if your actual current-year income turns out to be higher than expected — a useful hedge when income is unpredictable.
The Q2 2026 deadline is June 16 rather than June 15 because June 15 falls on a Sunday. When a due date falls on a weekend or federal holiday, it moves to the next business day. The Q4 deadline for tax year 2026 is January 15, 2027. Missing any of these four deadlines triggers a penalty on the underpaid amount for that specific quarter — even if you're fully paid up by year-end.
Most states that have income taxes also require quarterly estimated payments, with similar thresholds and timing. California uses the same four quarters but different amounts: 30% in Q1, 40% in Q2 (making Q2 the largest), and 0% and 30% in Q3 and Q4. Other states vary — check your state's revenue department for specifics.