Estimated Taxes Explained

Estimated tax is the pay-as-you-go system for income that has no withholding: self-employment income, freelance and gig work, rent, interest, dividends, and retirement income with no withholding elected. If you expect to owe tax on that income, you pay it in four quarterly instalments during the year instead of waiting until the return is filed. This guide covers who must pay, the 2026 due dates, and the safe-harbor rules that protect you from an underpayment penalty.

The four quarterly payments

Estimated tax is paid in four instalments, one for each quarter of the year. For tax year 2026 the due dates for individuals are 15 April 2026, 15 June 2026, 15 September 2026, and 15 January 2027. A due date that lands on a weekend or a holiday moves to the next business day.

The payment periods are uneven, which catches people out. The first period is 1 January to 31 March, the second is 1 April to 31 May, the third is 1 June to 31 August, and the fourth is 1 September to 31 December. The second period is only two months, while the others are three or four, so the June payment covers less time than the others.

How much to pay

Form 1040-ES includes a worksheet for figuring the amount. In broad terms, you estimate your total income for the year, work out the tax on it, subtract any withholding you expect from other sources, and divide the remainder by four. Nonresident aliens use Form 1040-ES (NR) instead. If your income is uneven through the year, for example seasonal work, the worksheet allows an annualised method so you are not penalised for a quiet first quarter.

There is a simpler alternative for people with a W-2 job as well. Raising the withholding on the W-4 at the job can replace estimated payments entirely, because withholding is treated as paid evenly through the year even if it was increased late in the year. That timing rule makes W-4 withholding the easiest fix for a shortfall discovered in the autumn.

Safe harbors: how to avoid the penalty

The safe-harbor rules say there is generally no underpayment penalty if your payments cover the smaller of 90% of the current year's tax or 100% of last year's tax. If last year's AGI was over $150,000, or $75,000 if married filing separately, the second figure is 110% of last year's tax instead of 100%.

That means last year's tax is often the safest target. If you pay 100%, or 110% for higher incomes, of what you owed last year, in four equal instalments, you are protected even if this year's income turns out much higher. You will still owe the extra tax with the return, but there will be no underpayment penalty on top of it.

When no estimated tax is owed

No estimated tax is owed for 2026 if you were a US citizen or resident alien for all of 2025 and had no tax liability for the full 12-month 2025 tax year. That covers people who owed nothing last year and were resident all year, which is a narrow group but a real one, for example someone returning to work after a year with no taxable income.

Everyone else who expects to owe $1,000 or more should pay. The penalty for not paying is not large, but it is avoidable, and the safe harbor makes it easy to avoid. Paying quarterly also spreads the cost, so April does not arrive with a full year's tax due at once.

How to pay

Payments can be made with Form 1040-ES by mail, or electronically through IRS Direct Pay or the IRS online account. Electronic payment is faster and gives an immediate confirmation, which is worth having. Each payment should be recorded with the date and amount, because the return asks for the total estimated payments made, and the IRS will match them.

If you miss a payment, pay it as soon as you can. The penalty is calculated quarterly, so a late payment stops the penalty from growing even though it cannot undo the part already accrued. And if you find in December that you are short, increasing W-4 withholding at a W-2 job is still the fastest catch-up, because withholding counts as paid evenly all year.

Sources: Internal Revenue Service, Form 1040-ES instructions and estimated tax guidance, https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes; IRS Direct Pay guidance.