Calculating and Filing Federal Quarterly Taxes for Small Businesses and Self-Employed

Unlike traditional employees who have taxes automatically withheld from each paycheck, small business owners and self-employed individuals are responsible for paying their own taxes four times per year. Knowing when quarterly taxes are due is essential to avoid penalties and stay compliant with IRS requirements.

What Are Quarterly Taxes?

Quarterly taxes are tax payments made to the IRS for federal withholding every quarter by small businesses and individuals who don’t work in traditional W-2 jobs. These payments are required if you expect to owe $1,000 or more in taxes for the current year.

Quarterly taxes include federal income tax, self-employment tax, and other applicable taxes, such as Social Security and Medicare tax. IRS Form 1040-ES is a worksheet that helps you calculate your estimated quarterly tax payment liability.

Are Quarterly Taxes and Estimated Taxes the Same Thing?

Yes, quarterly taxes are the same as estimated taxes. Quarterly taxes may also be referred to as estimated federal income taxes, quarterly estimated taxes, self-employment taxes, or quarterlies.

When Are Quarterly Taxes Due? 2026 Payment Deadlines

If you earn income without tax withholding, mark your compliance calendar with the quarterly tax payment due dates: April 15, June 16, September 15, and January 15. These are the dates your quarterly taxes are due (unless they fall on a weekend). The payment for the final quarter of the year is due in January of the next year.

The table below outlines when income is earned during each period and the corresponding due date for paying estimated quarterly taxes for the 2026 tax year. After your final payment in January 2027, you will file your 2026 annual tax return by April 2027.

Note: Always verify tax deadlines each year as they may vary slightly due to weekends or holidays.

What Happens if You Miss a Quarterly Estimated Tax Payment?

In general, you must pay at least 90% of your tax liability through withholding or by making timely quarterly estimated tax payments during each fiscal or calendar year. If you do not pay enough or miss a quarterly tax payment, penalties may apply even if you expect a refund when your return is filed.

The IRS calculates penalties based on the amount of tax you owe and the length of time that it remains unpaid. Penalties start at 0.5% of the total amount due, and they begin accruing as soon as you miss the deadline. Each month your payment is not received, the penalty increases, with a maximum penalty of 25%.

Penalties may be waived in certain situations, such as failure to pay due to circumstances beyond your control. If you realize you have missed a quarterly estimated payment, pay it immediately and submit the associated tax forms to the IRS as soon as possible.

Filing an Extension for Your Quarterly Estimated Taxes

If you cannot meet your quarterly tax payment deadlines, you can file for an extension. While an extension gives you extra time to submit your tax return, it does not provide additional time to pay any taxes due. Penalties and interest on unpaid taxes will still accrue from the original date due until the balance is paid. Business owners can request an extension by filing IRS Form 4868 for individual returns or Form 7004 for business returns.

Extensions can be helpful if you're still gathering information or experiencing cash flow issues, but they should not be relied upon as a long-term strategy. It's always best to make accurate, timely payments throughout the year to avoid additional charges.

State Estimated Tax Requirements

Most states with income taxes also require state quarterly tax payments, though requirements and deadlines vary from state to state. Some states align their payment schedules with federal due dates (April, July, October, and January), while others use different deadlines or calculation methods. For example, California and New York both require estimated payments but have their own forms and specific rules for determining who must pay.

Check your state's tax authority website or consult a tax professional to understand your specific state obligations. Failing to pay state estimated taxes can result in additional penalties beyond any federal consequences. Additionally, some cities and municipalities have their own estimated tax requirements, so verify local obligations as well. Now that you understand federal and state requirements, let's clarify who must make these payments and who may be exempt.

Who Needs To Pay Quarterly Taxes? (And Who Doesn't)

Self-employed individuals and businesses that expect to owe $1,000 or more in taxes for the current year must make estimated tax payments. While the general threshold for estimated tax payments is $1,000, self-employed individuals specifically must pay self-employment tax on net earnings of $400 or more, which is included in their quarterly estimated tax calculations.

If you fall into any of the following categories, you should pay estimated tax payments to avoid penalties and interest:

• Freelancers
• Independent contractors
• Sole proprietors
• Small business owners
• Farmers and fishers

If you're an employee and your employer withholds taxes from each paycheck, you don't need to pay estimated quarterly taxes.

Additionally, you are exempt from paying estimated taxes if you meet the following conditions:

• You have no tax liability for the current year
• You had no tax liability for the previous tax year
• You paid either 90% of your current year's tax liability or 100% of last year's tax liability

If you are unsure about your specific situation, consulting with a tax professional is always a good idea.

Small Business Owners and Freelancers

If you work for yourself as a freelancer, consultant, or independent contractor, you should plan to pay quarterly taxes on net earnings of $400 or more for the year.

• Payment Schedule: Follow the standard quarterly deadlines listed above.
• What To Pay: Calculate both income tax and self-employment tax (Social Security and Medicare).
• Common Freelance Work: Consulting, writing, design, ride-share driving, and delivery services.

Small Business Owners and LLC Members

Your business structure determines how you pay quarterly taxes, with different rules for LLCs, S Corps, partnerships, and sole proprietorships.

• Single-Member LLCs: Report your income as a sole proprietor on IRS Schedule C (Form 1040). Use the previous year’s income to estimate your LLC quarterly taxes for the next year.
• Multi-Member LLCs: These businesses are generally treated as partnerships for tax purposes. Members pay estimated taxes on their share of profits.
• S Corporation Owners: Pay yourself a reasonable salary with standard withholding. Any additional business profits passed through to you (often taken as distributions) are still taxable income and may require estimated tax payments.
• Sole Proprietors: Report business income directly on Schedule C along with personal returns and make quarterly self-employment tax payments on net profits.

First-Year Businesses & New Entrepreneurs

If you're launching a new business, plan to pay quarterly estimated taxes starting in your first year of operation.

• When To Start: Begin making quarterly tax payments as soon as you start earning business income.
• Estimate Carefully: Track income and expenses closely to avoid underpayment penalties in your startup year.
• Safe Harbor Protection: First-year business owners may avoid underpayment penalties under the safe harbor rule if they have paid at least 90% of their tax liability through estimated payments.
• Penalty Relief: The IRS offers some flexibility for new businesses and may provide penalty relief for reasonable cause.

When You Don’t Need To Pay Quarterly Taxes

If you meet all of the following conditions, you may be exempt from quarterly taxes under the three-condition exemption rule:

• You had no tax liability for the previous year
• You were a U.S. citizen or resident for a full twelve months for the previous tax year
• You had no tax liability for the current tax year, or your liability is less than $1000

Additionally, W-2 employees who pay at least 90% of their taxes through tax withholding have no quarterly tax requirement.

Benefits of Paying Quarterly Taxes

Paying quarterly taxes can support better financial management by helping you:

• Avoid Penalties and Interest: Making estimated quarterly tax payments ensures that you meet your tax obligations so you can avoid penalties and interest for underpayment or failure to pay.
• Improve Cash Flow: Quarterly payments ensure that you don’t have a large tax bill at the end of the year and helps you manage your cash flow more effectively.
• Stay IRS-Compliant: Prevent surprise tax bills and maintain better control over your financial situation.

How To Calculate Quarterly Taxes

Calculating quarterly taxes involves estimating your taxable income for the year and determining your tax payments.

Use this step-by-step guide to help you through the process:

1. Estimate your annual income
2. Subtract any above-the-line deductions you expect to incur
3. Subtract the standard deduction for your filing status
4. Subtract 50% of your self-employment tax
5. Use the latest tax brackets to determine your income tax rate
6. Multiply your adjusted gross income (AGI) by your income tax rate to calculate your income tax
7. To calculate self-employment tax: Multiply your estimated total income by 92.35%
8. Then multiply that result by 15.3% (the self-employment tax rate)
9. Add your income tax (from step 6) and self-employment tax (from step 8) together
10. Divide the result by 4 to get your estimated quarterly tax payment

Use these steps to accurately calculate your quarterly tax payments based on your estimated income.

Using Form 1040-ES for Quarterly Tax Calculations

Form 1040-ES is an IRS worksheet that walks you through the process of calculating your quarterly payments. To do so, you will need to estimate your total expected income for the year, and then subtract estimated deductions to determine taxable income.

Use the tax rate tables in the form to estimate your tax liability for the year and subtract any tax credits or withholdings from W-2 income. The amount remaining is your estimated annual tax liability. Divide this number by four to determine your quarterly payment.

Safe Harbor Method & Prior Year Tax

The safe harbor rule helps you avoid underpayment penalties by basing payments on last year’s income rather than trying to predict this year’s income.

It protects you from liability — even if you underestimate — as long as you meet at least one of the following guidelines:

• Pay at least 90% of your taxes owed for the current year
• Pay 100% of the prior year’s tax amount
• Pay 110% of the prior year’s tax amount if your AGI is more than $150,000

For example, if you paid $20,000 in total tax last year and your AGI was under $150,000, you can avoid underpayment penalties by paying $5,000 each quarter ($20,000 ÷ 4). Under the safe harbor rule, you will not be penalized for underpayment even if your income increases this year.

How To File Quarterly Taxes

The process for paying and filing quarterly estimated taxes is similar to filing an end-of-year tax return. To meet your quarterly requirements, you must calculate any tax owed using the appropriate IRS forms. Submit the completed forms and any payment due using one of the online or paper options available through the IRS.

Here's a more detailed step-by-step guide:

1. Determine your tax liability for the quarter. This will be based on your quarterly income and deductions
2. Fill out the correct IRS form used for calculating estimated tax liability
3. You can use one of the official IRS payment options to make a payment for the full amount of your estimated quarterly taxes due
4. Keep records of your payments, including a copy of your IRS form, any documentation used to calculate your estimated tax liability, and your payment confirmation

If you are unsure how or where to file your taxes, a tax preparation service provider can help you ensure compliance.

Required Forms

To correctly calculate your estimated taxes and submit them to the IRS, you will need to use the designated federal tax form for your situation. Most individual filers (including sole proprietors or partners) should use IRS Form 1040-ES. If you are unsure about which form applies, consult a tax professional.

Use the detailed instructions provided with each form to accurately calculate your estimated tax liability for the quarter. If you feel uncomfortable completing the forms, contacting an experienced quarterly tax preparer is the best way to reduce your risk of penalties.

How To Pay Quarterly Taxes

If you're wondering how to pay quarterly taxes, the IRS offers multiple convenient payment methods to submit your estimated taxes on time:

• Online Through the Electronic Federal Tax Payment System (EFTPS): EFTPS is a free online service allowing quick, secure payments directly to the IRS. This option gives you easy access to your payment history so you can track and manage past payments for future reference.
• By Mail to the Address Listed on Form 1040-ES: Mailing your payment allows for a tangible, physical record of your submission. This traditional method can be helpful for those who prefer paper documentation or need a mailing receipt as proof of payment.
• By Phone: You can pay your taxes over the phone, although you must submit your completed tax form via mail or online. This method can be convenient for those who prefer speaking to a representative, but it may take longer to process than other options.
• Using Your Mobile Device With the IRS2Go App: Use the IRS2Go app to make payments directly from your phone through a mobile-friendly interface. This is an excellent option if you need quick access to payment options.
• Same-Day Wire Transfer: A same-day wire transfer is a good option if you need faster payment processing, since this method ensures immediate receipt by the IRS. However, additional fees may apply, so it's typically used for last-minute payments.

Each option offers advantages to help you pay quarterly taxes on time, depending on your needs.

Common Mistakes When Filing Quarterly Estimated Taxes

The IRS maintains strict compliance expectations for quarterly taxes, and mistakes can lead to penalties and financial setbacks. Here are some of the most common errors to avoid.

• Underpayment: If you don’t accurately estimate your tax liability, you might pay less than you owe. This can happen if your business income fluctuates throughout the year, leading to miscalculations.
• Missed Deadlines: Failing to pay by the expected due date will result in late fees and interest charges.
• Incorrect Calculations: Errors in estimating income or overlooking deductions can result in paying too little or too much.
• Misunderstanding Safe Harbor Rules: If you don’t meet the 90% minimum for safe harbor protection, you could still face penalties.
• Poor Record-Keeping: To accurately estimate your tax liability, you need accurate records of income, expenses, and deductions. If you don’t have them, you may pay too little or too much in quarterly tax payments.
• Mixing Business and Personal Expenses: The IRS recommends keeping separate accounts for business and personal expenses. If you don't, it may be harder to accurately estimate your quarterly payments, and you may have difficulty if you are audited.

Tips To Avoid Common Mistakes

• Set calendar reminders for each quarterly tax payment deadline.
• Regularly review income and expenses to adjust your estimated taxes as needed.
• Keep thorough records of all deductible expenses to avoid over- or underestimating your tax liability.
• Maintain separate accounts for business and personal expenses.
• Use tax software to automate tax calculations and compliance.
• Conduct regular income reviews to stay on track.
• Consult a tax professional to ensure correct calculations.

Tools and Resources for Calculating and Filing Quarterly Taxes

The right tools make it easier to calculate quarterly tax payments and minimize errors so you can focus on your customers, employees, and operations. Here are some of the resources you can use to ensure accuracy and compliance:

• Online Tax Calculators: Use an online quarterly tax calculator to quickly estimate your tax liability based on income, deductions, and expenses.
• Tax Preparation Software: Take advantage of specialized features for calculating self-employment taxes, ensuring accurate payments, and adhering to IRS deadlines.
• Tax Service Providers: Work with an experienced provider who specializes in helping small business owners automate the calculation and filing processes.