Quarterly estimated taxes are IRS prepayments of income and self-employment tax made by self-employed individuals and business owners on income not subject to payroll withholding — due April 15, June 15, September 15, and January 15.
The US tax system operates on pay-as-you-go. Employees have income tax withheld automatically from each paycheck. Self-employed individuals, sole proprietors, partners, S-corp owners who take distributions, and owners of pass-through entities must make quarterly estimated tax payments to approximate what withholding would have covered. The IRS's Form 1040-ES (https://www.irs.gov/payments/estimated-taxes) guides the calculation. The safe harbor rules define when underpayment penalties are avoided: (1) pay at least 90% of the current year's tax liability, or (2) pay 100% of last year's tax liability (110% for high earners — AGI above $150,000 filing jointly). Meeting either safe harbor avoids the underpayment penalty even if you owe at year-end. For business owners, quarterly estimated taxes cover federal income tax plus self-employment tax (15.3% on net SE income). State estimated tax payments are typically required separately under state-specific rules and due dates. Most states mirror the IRS quarters but some differ. Cash flow planning is the practical challenge: setting aside 25–35% of net profit each quarter (depending on your bracket and state) before spending it is the discipline that prevents year-end tax surprises. Many business bank accounts support a 'tax bucket' feature (e.g., Relay, Novo) that auto-transfers a percentage of each deposit into a dedicated tax savings account.
Q1: April 15 (for Jan–Mar income). Q2: June 15 (for Apr–May income — note the short quarter). Q3: September 15 (for Jun–Aug income). Q4: January 15 of the following year (for Sep–Dec income). If a due date falls on a weekend or federal holiday, it moves to the next business day.
The IRS charges an underpayment penalty — calculated as the federal short-term rate plus 3 percentage points on the underpaid amount for the period it was underpaid. Form 2210 calculates the penalty at filing. You can avoid the penalty by meeting safe harbor: 90% of current year tax or 100% of last year's tax (110% for AGI above $150K).
A common rule of thumb: 25–30% of net business profit. Adjust up if you're in a high income bracket or high-tax state, down if you have significant deductions. Use last year's tax return as a starting baseline — divide last year's total tax by four to get safe harbor payment amounts.
Yes. Most states require separate quarterly estimated payments if you expect to owe $500–$1,000+ in state tax. State due dates and safe harbor rules vary. Check your state's revenue department website or consult a CPA for state-specific rules.