Estimated tax is how you pay taxes on income that does not have federal taxes withheld.
This includes income from self‑employment, interest, dividends, rental income, and some retirement income.
Estimated taxes are usually paid four times a year to help avoid underpayment penalties.
🧾 Who Needs to Pay Estimated Tax?
You generally need to make estimated tax payments if both of the following apply:
- You expect to owe $1,000 or more in federal tax after subtracting withholding and credits
- You don’t have enough tax withheld from wages or other income
This commonly applies to taxpayers with:
- Self‑employment income
- Investment income (interest, dividends)
- Rental income
- Retirement distributions with little or no withholding
📅 Payment Schedule
Estimated tax payments are due quarterly:
- April 15
- June 15
- September 15
- January 15 (of the following year)
📌 If a due date falls on a weekend or federal holiday, the deadline moves to the next business day.
📄 Form Used
- Estimated taxes are calculated using Form 1040‑ES
- Payments can be made:
- Online using IRS Direct Pay or IRS online payment options
- By mailing a check with a 1040‑ES payment voucher
✅ You can pay unequal amounts, as long as enough tax is paid by each deadline.
🛠️ Example
Scenario:
Christina earns $60,000 from self‑employment and expects to owe $8,000 in federal taxes for the year.
- $8,000 ÷ 4 = $2,000 per quarter
✅ Christina should make four estimated payments of $2,000 to avoid underpayment penalties.