Key Takeaways
- In most cases, if you expect to owe $1,000 or more in taxes for the year even after withholding, you need to make quarterly payments to avoid a penalty.
- If your estimated payments and tax withholding for the year equals your total tax for the previous year, then you typically wouldn't need to pay estimated taxes to avoid penalties.
- Estimated tax payments are typically due on April 15, June 15, and September 15 of the current year and then January 15 of the following year.
- You can skip the final (January 15) estimated tax payment if you will file your return and pay all the tax due by February 1.
Who is required to pay estimated taxes?
In most cases, to avoid a penalty, you need to make estimated tax payments if you expect to owe $1,000 or more in taxes for the year—over and above the amount withheld from your wages or other income. In some cases, though, the $1,000 trigger point doesn't matter.
How do I calculate my estimated taxes?
How you calculate your estimated taxes will depend on your prior year's Adjusted Gross Income (AGI):
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If your prior year Adjusted Gross Income was $150,000 or less: You can avoid a penalty if you pay either 90 percent of this year's income tax liability or 100 percent of your income tax liability from last year (dividing what you paid last year into four quarterly payments).
This rule helps if you have a big spike in income one year, say, because you sell an investment for a huge gain or win the lottery.
If wage withholding for the year equals the amount of tax you owed in the previous year, then you typically wouldn't need to pay estimated taxes, no matter how much extra tax you owe on your windfall.
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If your prior year's Adjusted Gross Income was greater than $150,000: You'll need to pay either 90 percent of this year's income tax liability or 110 percent of last year's tax liability.
Note: If you are a farmer or a fisherman, replace the 90 percent shown above with 66.67 percent. Because many special rules apply to farmers, refer to IRS Publication 225: Farmer's Tax Guide for additional information.
What if my income has jumped?
Most people pay just over 100 percent of their prior-year income tax liability, as long as their business income doesn't change dramatically. But even if you pay 100 percent (or 110 percent if your income is high enough) of your prior year's tax, if your business income has increased substantially, you may discover that you still owe more money to the IRS when you prepare your income tax return, even though you might be exempt from the estimated tax underpayment penalty.
If you find yourself in this situation, you could:
- Pay additional estimated taxes ahead of time, to avoid a nasty bill at tax time. However, this might limit the amount of money to use in your business until your tax return is due.
- Plan ahead to have the necessary cash to pay your tax bill when you file. Just be careful because not being able to pay your total tax bill can lead to penalties and interest.
How should I track what I've paid?
After you start paying estimated taxes, be sure to keep a separate record of the dates you paid them and how much you sent for each period. If you don't keep accurate records, it can take you longer to prepare your income tax return, and you may miss one or more of the payments you made. If you pay estimated taxes, be sure to claim credit for them when you file your tax return.
TurboTax Tip:
If you pay estimated taxes, be sure to claim credit for them when you file your tax return.
What forms do I need to pay my estimated taxes?
For estimated taxes, use Form 1040-ES: Estimated Tax for Individuals. Form 1040-ES includes a worksheet to help you determine your estimated tax.
When are my estimated taxes due?
The IRS breaks the tax year into four quarters.
- The first quarter is three months (January 1 to March 31)
- The second "quarter" is two months long (April 1 to May 31)
- The third is three months (June 1 to August 31)
- The fourth covers the final four months of the year
The installment payments are typically due on:
- April 15 (of the current year)
- June 15 (of the current year)
- September 15 (of the current year)
- January 15 (of the following year)
You can skip the final payment if you will file your return and pay all the tax due by February 1. If a due date falls on a weekend or legal holiday, the deadline is pushed to the next business day.
If you know early in the year that you will have to make estimated payments, each of the four payments should be 25% of the amount due.
Also note: If at least two-thirds of your gross income is from farming or fishing, you have only one estimated tax payment for the year, which is due by January 15 of the following year. You can even skip making the single estimated tax payment as long as you file your tax return by March 1 and pay any tax due in full.
Do I still have to make estimated payments if I don't earn income until later in the year?
You don't have to make any payment until you have income on which estimated taxes are due.
For example, say you receive income during the third quarter that, for the first time, makes you liable for estimated tax payments. Your first payment would be due on the third installment date—September 15—and you are expected to pay 75% of the tax that is due. You will need to use IRS Form 2210 to show that your estimated tax payment is due because of income during a specific time of the year. If not, the IRS assumes that you had the income throughout the year and simply underpaid your estimated tax. This could lead to a penalty.
To hold your payments to a minimum, base each installment on what you have to pay to avoid the penalty, using any exceptions that benefit you.
Can I use my tax refund to pay estimated tax payments?
If you have a tax refund coming from the IRS, you can elect on your return to have part or all of the money applied to your estimated tax bill for the following year. Although the IRS doesn't pay any interest on such advance payments, it may make sense to use the refund to pay the first installment (typically due April 15) and perhaps even the second just to save yourself the hassle of writing and sending in the checks.
When can I avoid paying estimated taxes?
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If you expect to owe less than $1,000.
If you expect to owe less than $1,000 in income tax this year after applying your federal income tax withholding, you don't have to make estimated tax payments.
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You're already withholding enough tax through your employer.
If all your regular income comes in salary and your employer is withholding enough taxes on your pay, you should not need to pay any estimated taxes unless you suddenly strike it rich by selling stock at a large profit or winning the lottery.
If you start a side business (and you report your income from that business on Schedule C) while continuing to work for an employer who withholds from your paycheck, you may be able to increase your withholding at work so that it equals what your tax liability would be for the entire year, or is enough to meet the exception for last year's tax liability that we told you about earlier. In that case, you will not need to pay estimated taxes on your side business.
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You're retired and you're withholding enough taxes from other income sources.
Some retirees avoid the need to make estimated payments by having enough tax withheld from required distributions from IRAs and other income sources at year-end to cover their tax bill for the year. You can even have federal income tax withheld from your Social Security income if you are receiving benefits.
Are there benefits to skipping payments and paying penalties later?
We can't think of any good reason. Ignoring the rules might save you some time during the year, but you'll pay the piper come tax day.
How much are penalties for underpaying estimated taxes?
There's no flat fee for underpaying your estimated taxes. Instead, the IRS charges interest on the amount you were short, and the rate is reset every quarter.
The penalty rate is the federal short-term interest rate plus 3 percentage points. In recent quarters, that's worked out to between 6% and 8% annually — the rate is 7% for Q1 2026 and 6% for Q2 2026.
The IRS calculates the penalty separately for each of the four payment periods. For any quarter you underpaid, interest accrues — compounded daily — from the day after the payment was due until you pay it or until April 15 of the following year, whichever comes first. That means an underpayment from your April 15 installment costs more than the same shortfall from your January 15 installment, simply because interest has more time to accumulate.
A few things to keep in mind:
- The penalty isn't tax-deductible. Unlike some business expenses, you can't write off what you owe the IRS for underpayment.
- You can avoid the penalty entirely by meeting one of the safe harbor rules — paying at least 90% of your current year's tax liability or 100% of last year's (110% if your prior-year AGI was over $150,000).
- The IRS will do the math for you. If you underpaid, you'll get a notice with the amount owed. You can also calculate it yourself using IRS Form 2210 and include the penalty with your return.
- Waivers are available in limited cases, such as when the underpayment was caused by a casualty, disaster, or other unusual circumstance — or if you retired (at age 62 or older) or became disabled during the tax year or the prior year, and the shortfall was due to reasonable cause rather than willful neglect.
If you realize mid-year that you've underpaid, making a catch-up payment as soon as possible helps limit the damage — the penalty stops accruing on any amount the moment it's paid.
How do I pay estimated taxes online?
The IRS offers several free or low-cost ways to pay your estimated taxes electronically — most are faster than mailing a check and give you instant confirmation that your payment went through.
Here are the main options:
- IRS Online Account. Sign in at IRS.gov/account to make a payment, view your payment history, and check past tax records all in one place. This is the most convenient option for most individual taxpayers, since it ties your payments directly to your IRS records.
- IRS Direct Pay. Pay directly from your checking or savings account at IRS.gov/directpay. There's no fee, no registration required, and you'll get instant confirmation. You can schedule a payment up to a year in advance and cancel or change it up to two business days before the scheduled date.
- Debit card, credit card, or digital wallet. You can pay through one of the IRS-approved third-party processors using a debit card, credit card, or a digital wallet like PayPal. The IRS doesn't charge a fee, but the processor does — typically a flat fee for debit cards and a percentage of the payment for credit cards.
- IRS2Go mobile app. The official IRS app lets you make payments from your phone using Direct Pay or a debit/credit card, the same way you would on the website.
- EFTPS (Electronic Federal Tax Payment System). EFTPS has long been a popular option for individuals and businesses, but the IRS is phasing it out for individual taxpayers in 2026. New individual accounts can no longer be created, and existing individual users will need to transition to another payment method later in the year. Businesses can continue using EFTPS as usual.
- Through TurboTax. When you file with TurboTax, we can calculate your estimated tax payments for the upcoming year and generate prefilled Form 1040-ES vouchers based on your return. TurboTax doesn't submit the payments to the IRS for you, but it takes the guesswork out of figuring out how much to pay each quarter — you can then send the payment through any of the IRS options above.
A few quick tips:
- Make sure you select the right tax year and payment type. When you pay, you'll be asked to indicate the reason (such as "estimated tax") and the year the payment applies to. Selecting the wrong year is a common mistake and can be a hassle to fix.
- Save your confirmation number. Whether you pay through Direct Pay, your IRS account, or a card processor, you'll receive a confirmation number — keep it with your tax records so you can easily claim credit for the payment when you file.
- Schedule payments early. Bank transfers can take a day or two to process. To avoid missing a due date, schedule your payment at least a couple of business days in advance.
What if I'm a US citizen abroad who needs to pay estimated taxes?
US citizens and resident aliens living abroad are subject to the same estimated tax rules as taxpayers in the United States. If you expect to owe $1,000 or more in US tax for the year after withholding and credits, you generally need to make quarterly estimated payments — no matter where in the world you live.
A few things make the process a little different when you're overseas:
- The Foreign Earned Income Exclusion (FEIE) can reduce or eliminate the requirement. For tax year 2025, qualifying taxpayers can exclude up to $130,000 of foreign earned income from US tax (rising to $132,900 for tax year 2026). If the FEIE — combined with the Foreign Tax Credit and other deductions — drops your expected US tax bill below $1,000, you typically won't need to make estimated payments. Keep in mind that the FEIE only applies to income tax. If you're self-employed, you still owe US self-employment tax (15.3% for Social Security and Medicare) on your net business income, and that amount counts toward the $1,000 threshold.
- Quarterly due dates are the same. Estimated tax payments are still due April 15, June 15, September 15, and January 15 of the following year — the automatic two-month filing extension for taxpayers abroad doesn't move these deadlines. If a due date falls on a weekend or holiday, it shifts to the next business day.
- You can pay from a US bank account online. IRS Direct Pay and your IRS Online Account both work from anywhere with internet access, as long as you're paying from a US checking or savings account. If you don't have a US bank account, you can pay by debit or credit card through one of the IRS-approved third-party processors (fees apply), or send an international wire transfer using the IRS's foreign electronic payment instructions.
- Currency matters. All US tax payments must be made in US dollars. If you're converting from foreign currency, factor exchange rates and any wire transfer fees into your payment amount so you don't fall short of what's owed.
- Filing extensions don't extend payment deadlines. US citizens abroad get an automatic two-month extension to file their return (until June 15), but any tax owed for the prior year is still due by April 15. Interest starts accruing on unpaid balances the day after — even if you're not yet required to file. The same principle applies to estimated taxes: extensions are for paperwork, not payment.
If your situation involves foreign tax credits, treaty benefits, or self-employment income earned overseas, the math can get complicated quickly. A tax expert who works with expats can help you figure out whether you need to make estimated payments at all — and how much.
With TurboTax Experts for Business, get unlimited expert help while you do your taxes, or let a tax expert file completely for you, start to finish. Our small business tax experts are matched to your specific industry and stay up to date on the latest tax laws, ensuring you get every credit and deduction possible to keep more money in your business. Small business owners get access to unlimited, year-round advice and answers at no extra cost and a 100% accurate, Expert Approved guarantee.
