How Do I Calculate and File Quarterly Taxes?

Individuals who earn income not subject to employer withholding, such as those who are self-employed or have significant investment returns, often pay taxes through quarterly estimated payments. These payments are a way to pay tax on income as it is earned throughout the year, covering both income tax and self-employment taxes, which include Social Security and Medicare. This pay-as-you-go system helps manage tax obligations and prevents a large balance due when filing an annual return.

Determining if You Need to Pay Quarterly Taxes

You are generally obligated to make estimated tax payments if you expect to owe at least $1,000 in federal tax for the year. This is after accounting for any taxes withheld from other sources and any refundable credits you anticipate receiving.

You must also make estimated payments if you expect your withholding and refundable credits to be less than 90% of the tax you will owe for the current year, or 100% of the tax shown on your prior year’s return. For taxpayers with a higher adjusted gross income—over $150,000 for joint filers or $75,000 for single filers—this second benchmark increases to 110% of the prior year’s tax liability.

These rules commonly affect individuals with certain types of income that are not subject to automatic withholding. This includes earnings from self-employment, such as freelance work or operating a small business. Other common income sources that can trigger the need for estimated payments are interest, dividends from investments, capital gains from the sale of assets, and rental income.

Information Needed to Calculate Your Payment

Before you can calculate your quarterly tax payment, you must estimate your total expected gross income for the entire year. This includes all earnings from your business or self-employment activities, as well as any other income you anticipate receiving, such as interest, dividends, or capital gains.

Next, you will need to compile a detailed record of all your business-related expenses. These are the costs incurred in running your business, which can be subtracted from your gross income to determine your net profit. Common examples include office supplies, travel costs, and a portion of your home office expenses.

A copy of your previous year’s tax return, Form 1040, is another valuable document. This return provides a baseline for your income and deductions. It also contains your prior year’s total tax liability, which is used in one of the rules to avoid underpayment penalties.

All of this information is used for the primary tool for this calculation: IRS Form 1040-ES, Estimated Tax for Individuals. This form includes a detailed worksheet that guides you through the process of figuring out your estimated tax.

Calculating Your Quarterly Tax Payment

The calculation of your quarterly tax payment begins with the worksheet found in Form 1040-ES. The first step is to determine your expected adjusted gross income (AGI) for the year. This involves taking your total estimated gross income and subtracting any applicable above-the-line deductions, such as contributions to a traditional IRA or one-half of your self-employment taxes.

Once you have your estimated AGI, you will subtract your anticipated deductions to arrive at your taxable income. You can choose to take either the standard deduction for your filing status or itemize your deductions if you expect them to be greater. After determining your taxable income, you apply the appropriate tax brackets to calculate your estimated income tax for the year. You will also need to add any other taxes you expect to owe, such as self-employment tax.

From this total estimated tax, you will subtract any tax credits you are eligible to take. After applying credits, the remaining amount is your total estimated tax liability for the year. To find your required quarterly payment, you simply divide this annual amount by four.

If your income is inconsistent, the annualized income installment method is an alternative. This method allows you to adjust your payment for each quarter based on the income earned during that period. This can help avoid large payments during times of low income but requires more detailed calculations.

Methods for Submitting Your Payment

The IRS provides several convenient methods for submission.

• IRS Direct Pay is one of the most direct options, allowing you to make a payment from your checking or savings account at no cost. This service is available on the IRS website and does not require you to create an account.
• The Electronic Federal Tax Payment System (EFTPS) is a free online service from the Treasury Department that allows you to schedule payments in advance. You can set up payments for all four quarters at once, but registration is required.
• If you prefer to pay by card, the IRS accepts payments via debit card, credit card, or digital wallet through third-party payment processors. These processors charge a fee for their services, which varies by processor.
• For a traditional method, you can mail a check or money order to the IRS. When mailing a payment, you must include a payment voucher from Form 1040-ES, using the correct one for the payment period.

Payment Deadlines and Underpayment Penalties

The tax year is divided into four payment periods, each with a specific due date. For income earned from January 1 to March 31, the payment is due on April 15. The deadline for income earned from April 1 to May 31 is June 16 in 2025, as the typical June 15 deadline falls on a weekend.

The third payment period covers income from June 1 to August 31, with the payment due on September 15. The final period covers September 1 through December 31, and that payment is due on January 15 of the following year. If any of these dates fall on a weekend or a legal holiday, the deadline is moved to the next business day.

Failing to pay enough tax by the due date for each of these periods can result in an underpayment penalty. The IRS may charge this penalty even if you are due a refund when you ultimately file your annual tax return. The penalty is calculated separately for each payment period, so underpaying one quarter may incur a penalty even if you overpay in a later quarter to catch up.