For many people, taxes feel like a once-a-year event. But if you earn income outside of a traditional paycheck, whether through a business, investments, or side work, the IRS operates a little differently. It expects you to pay taxes as you earn income, not just in April. That’s where estimated tax payments come in.
What are estimated tax payments and who needs to pay?
Estimated taxes are quarterly payments made to the IRS to cover income that doesn’t have taxes automatically withheld. Think self-employment income, rental income, or investment earnings. As a general rule, you’ll need to make these payments if you expect to owe at least $1,000 in taxes after accounting for withholding and credits.
When are payments due?
The IRS breaks the year into four payment periods (they don’t perfectly match calendar quarters.) Payments are due on these dates:
- April 15
- June 15
- September 15
- January 15 (following year)
Missing a payment doesn’t just push the obligation forward, but it can create a penalty for that specific period.
What happens if you don’t pay enough?
The IRS may apply an underpayment penalty, which is essentially an interest charge on the amount you should have paid during that quarter.
The penalty is based on:
- How much you underpaid
- How long it remained unpaid
- The IRS interest rate (which is adjusted periodically)
One important nuance: even if you pay your full tax bill by April, you can still owe a penalty if you didn’t pay enough throughout the year.
How to avoid penalties
There’s a helpful concept called the “safe harbor” rule. You generally won’t owe a penalty, if you meet one of these thresholds:
- Pay at least 90% of your current year tax, or
- Pay 100% of last year’s tax (110% for higher-income earners), or
- Owe less than $1,000 at filing
This is often the simplest way to stay compliant, especially if your income fluctuates.
By default, the IRS assumes that income is earned evenly throughout the year. If your income is more heavily weighted toward the end of the year, it’s recommended that you work with a preparer to calculate how penalties are assessed under the “Annualized Installment Method.”
How to make payments
The IRS offers several straightforward ways to pay:
- Direct Pay from your bank account (free)
- Online IRS account for scheduling payments
- EFTPS (Electronic Federal Tax Payment System)
- Credit or debit card (fees apply)
- Wire transfer
Most people find Direct Pay or their online IRS account to be the easiest options. In a 2025 executive order, agencies are required to start transitioning remittances to the Treasury electronically. Starting June 1, 2026, Charles Schwab will no longer be issuing checks to the Treasury. Charles Schwab will continue to issue checks to state agencies.
Estimated tax payments aren’t about paying more, they’re about when you pay. Handled well, they become a simple rhythm throughout the year. Ignored, they tend to show up as surprises, usually with interest attached. A little planning here goes a long way toward avoiding both.
Please note: JNBA is neither an agent of IRS nor an agent nor an agent U.S. Department of Treasury. JNBA is not an accountant and no portion of the above should be construed as accounting advice. All accounting issues should be addressed with an accounting professional of your choosing. Due to various factors, including changing market conditions and/or applicable laws, some of the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from JNBA Financial Advisors.
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