Black Friday sale: Up to $1400 off bookkeeping, 100% tax-deductible.
In this guide, we’ll show you how to calculate and pay your federal estimated quarterly taxes, and walk you through an example that clarifies the process.
And if you want help calculating your taxes, you can get straight to the tax preparation with our free estimated tax calculator.
This tool also functions as a self-employed tax calculator. Just enter in all your information, and we’ll tell you how much tax you owe.
What are estimated tax payments?
If you’re self-employed, you’re generally required to pay taxes in four installments a year as “estimated payments,” rather than in one lump sum. The reason it’s called “estimated” is because you’re estimating how much income you’ll make this year, and paying taxes on that amount (federal income tax, self-employment tax, and any other applicable taxes).
Do I have to make estimated tax payments?
If you intend to file as a sole proprietor, a partnership, S corporation shareholder, and/or a self-employed individual, you’ll generally need to make estimated quarterly tax payments if you will owe taxes of $1,000 or more.
Businesses that file as a corporation generally need to make estimated tax payments if they expect to owe $500 or more in tax for the current year. If you meet these IRS minimums, then you’ll likely have to file estimated quarterly taxes.
If you need some help with your estimated taxes, check out Bench. We’ll get your books in order and take care of federal tax forms (you’ll just need to pay the taxes themselves!).
You don’t need to pay estimated taxes if…
You’re an employee: If you’re an employee, your employer should be doing the quarterly tax withholding on your behalf. That being said, sometimes they can get the amounts wrong—fill out Form W-4 and give it to your employer to make sure that they’re deducting the correct amount.
You’re a special case: If you meet all three very specific conditions below, then you don’t have to pay estimated quarterly taxes:
- You did not owe any taxes in the previous tax year, and did not have to file an income tax return
- You were a US citizen or resident for the entire year
- Your tax year was 12 months long
If you don’t meet all of the criteria for non-payment above, then you’re one of the many Americans who needs to pay estimated quarterly taxes—read on!
How to calculate estimated taxes
To calculate your estimated taxes, you will add up your total tax liability for the current year—including self-employment tax, individual income tax, and any other taxes—and divide that number by four.
Use our step-by-step quarterly tax calculator to estimate how much you owe:
The IRS has created an Estimated Tax Worksheet found in Form 1040-ES for individual filers while corporations use the Estimated Tax Worksheet of Publication 542 (formerly Form 1120-W) for their calculation. The worksheets guide you through these calculations in detail and provide you with payment vouchers.
Keep reading for a more in-depth explanation of how to calculate your estimated taxes.
Further reading: What is Self Employment Tax?
A step by step guide to calculating your estimated taxes
To make the process clear, here’s an example of how Stephanie, a small business owner of a sole proprietorship, would calculate her estimated quarterly tax payments, based on her income tax and self-employment tax owed.
Step 1: Estimate taxable income for the year
Let’s start with Stephanie’s income tax. In order to estimate how much income tax she will have to pay for the year, Stephanie estimates her income for the year (let’s say she expects to make 90K this year). She then subtracts any above-the-line deductions she thinks she’ll incur for the year.
$90,000 (estimated income) minus $15,000 (above-the-line deductions) = $75,000. This new number is Stephanie’s “adjusted gross income.”
Then, she subtracts the standard deduction for single taxpayers in 2023, which is $13,850.
Stephanie can also deduct 50% of her self-employment tax of $12,716.59 (calculated below). She can deduct $6,358.
So her total estimated taxable income is $54,792.
Step 2: Calculate income tax
Next, Stephanie multiplies her adjusted gross income by her income tax rate (according to the 2023 tax bracket) to find her tax due. Tax brackets change each year, so be sure to consult the most recent numbers.
Based on Stephanie’s tax bracket, her estimated income taxes owed for the year works out to $7,361.74.
Step 3: Calculate self-employment tax
Because Stephanie earned more than $400 this year, she will also have to pay self-employment tax. To calculate self-employment tax, she first has to multiply her estimated total income ($90,000) by 92.35%—this is effectively her self-employment taxable income. She then multiplies this number by 15.3%, the self-employment tax rate. Where does the 15.3% come from? It’s the combination of Social Security tax (12.4%) and Medicare (2.9%). Together, they make up the 15.3% “self-employment tax” figure.
So Stephanie’s self-employment tax total is $90,000 x 92.35% x 15.3%, which works out to $12,716.59.
Which brings Stephanie’s estimated quarterly taxes total to: $7,361.74 (estimated income tax owed) + $12,716.59 (estimated self-employment taxes) = $20,078.33
Step 4: Add it all together, and divide by four.
Now, the final step. To calculate her estimated quarterly tax payments for each quarter, Stephanie simply adds together her income tax and her self-employment tax for the year and divides this number by four. Voila.
$7,361.74 + $12,716.59 = $20,078.33 (Stephanie’s total estimated taxes).
$20,078.33/4 = $5,019.58 (Stephanie’s quarterly tax payment).
If you filed your previous year’s taxes with the help of a CPA, they should also be able to send you estimates for this year’s payments. And if you’re paying estimated quarterly taxes for the first time, it can’t hurt to run your numbers by a CPA before submitting.
When are estimated taxes due?
Estimated quarterly tax payments are due four times per year, on the 15th of April, June, September, and January (or the next business day if it’s a weekend or holiday).
Note: due dates that fall on a weekend or a legal holiday are shifted to the next business day.
Here are the 2024 estimated quarterly tax deadlines:
- For the period Jan 1 to March 31: April 15
- For the period April 1 to May 31: June 17
- For the period June 1 to August 31: September 16
- For the period September 1 to December 31: January 15 of the following year, 2025
It’s a good idea to set these due dates in your calendar at the start of every tax year.
Note: Due dates that fall on a weekend or a legal holiday are shifted to the next business day.
You may be able to skip filing and paying the estimated tax payment due on January 15, 2025, if you have filed your annual tax return and paid your full obligation by the 15th. There is no need to make two payments in the same month. Those who are filing income taxes in March or April of 2025 should make the fourth estimated tax payment by January 15.
Getting ahead of your quarterly tax deadlines
Quarterly tax deadlines can creep up fast, leaving you feeling unprepared for a large payment to the IRS.
At the start of the tax year, Bench provides small businesses with quarterly tax vouchers for the upcoming year, so you’re never left guessing how much you’ll owe. To learn more about our quarterly tax support, including annual filing, view our small business tax services.
How to make estimated tax payments
Submitting your payment to the IRS is a breeze: just fill out form 1040-ES and mail it along with a check or money order to the IRS office closest to you.
You can also pay by credit card online or by phone via the IRS Payments Gateway.
For corporations, payments must be filed through the Electronic Federal Tax Payment System.
What happens if I miss the estimated tax payments deadline?
Running your business means meeting deadlines, and the IRS expects no less. The deadlines for filing quarterly tax payments are strict and extensions aren’t allowed. If you want to make sure you make your 2024 tax filing deadlines, you should consider paying your small business taxes online for easy documentation as well as tax confirmations and receipts.
But what happens if you miss a payment, or if, despite your best intentions, you accidentally make a gross miscalculation? Unfortunately, you can be hit with a penalty if you miss the deadline or don’t withhold or pay the right amounts. According to the IRS, you can expect to pay 5% of the unpaid taxes every month if you fail to file. Penalties accrue up to 25% of the unpaid tax amount.
Fortunately for the smallest businesses, the penalty doesn’t kick in unless you owe more than $1,000 in tax. You can also avoid an IRS penalty if you pay 100% of the tax your business owed in the previous year as estimated taxes for this year. That would mean that you pay the same amount as your tax obligation for 2023 over the course of 2024 as estimated payments.
To avoid an overpayment or underpayment penalty, you can pay either at least 90% of this year’s tax bill, or pay the same amount (100%) as the taxes you owed the prior year, whichever is smaller.
If your gross income is greater than $150,000, you can skip potential penalties by paying 110% of your previous year’s obligations as your current year’s estimated payments.
The pain of tax penalties
The IRS may impose penalties on quarterly tax payments for a few reasons:
- Not paying on time
- Not paying enough tax for the year
The “safe harbor” rule of estimated tax payments
Paying 100% of the taxes you owed on last year’s federal tax return is sometimes referred to as the safe harbor rule. Even if your income grew this year, you will avoid penalties if you match the payments that you owed in the previous year (but you will still have to make up the additional tax payments).
One important caveat—if your annual income is more than $150,000 per year, then you’re required to pay 110% of what you paid in taxes last year.
Paying taxes four times a year won’t be the most fun thing you’ll do as an entrepreneur, but proper preparation, organized recordkeeping, and tax-ready books can help make it one of the most painless tasks. And when in doubt, a tax professional can help you figure out your estimated tax payments to remove the guesswork.
Note: This guide only covers federal taxes. If you live in a state that charges income tax, you may also need to set up quarterly state tax payments.
