Quarterly Taxes: How to Pay and Avoid Penalties
Let’s dive into one of the most common questions we get from business owners: “How do I pay my quarterly taxes without getting hit by the IRS?”
If you are self-employed, a freelancer, or have significant investment income, the IRS expects you to pay your taxes as you earn the money. This is called a “pay-as-you-go” system. Here is the scoop on how it works and how to stay in the clear.
Who Needs to Pay?
Generally, you must make estimated payments if you expect to owe at least $1,000 in tax for the year after subtracting your withholding and credits. This applies to sole proprietors, partners, and S corporation shareholders. If you also have a W-2 job, your employer withholds tax for you, but if your side business or investments bring in a lot of extra cash, those withholdings might not be enough to cover the total bill.
When are the Payments Due?
The IRS divides the year into four payment periods. For most years, the deadlines are:
April 15: For income earned Jan 1 to March 31.
June 15: For income earned April 1 to May 31.
September 15: For income earned June 1 to August 31.
January 15 (next year): For income earned Sept 1 to Dec 31.
Note: If these dates fall on a weekend or legal holiday, the deadline moves to the next business day.
Use the “Safe Harbor” Rule!!
The easiest way to avoid underpayment penalties is to follow the “Safe Harbor” rules. So long as you are paying as you go and meeting the deadlines, you won’t have an underpayment penalty if you pay at least (whichever is lower):
90% of the tax you owe for the current year, or
100% of the tax shown on your return for the prior year.
If your adjusted gross income (AGI) was more than $150,000 (or $75,000 if married filing separately), that 100% rule bumps up to 110%.
Is There a Quarterly Return to File?
A common misunderstanding is that you need to file a mini-tax return every few months. In reality, there is no actual quarterly tax return to file. You don’t have to send in a simplified version of your 1040 every three months. You simply send the payment.
You can pay online through the IRS website (IRS.gov/payments) using Direct Pay or the Electronic Federal Tax Payment System (EFTPS). If you prefer the old-school way, you can mail a check with a payment voucher called Form 1040-ES. However, if you mail a check, we strongly recommend mailing it using Certified Mail with USPS. This way you have a tracking receipt and can prove you submitted payment prior to the deadlines.
What you can do next
Check your last year’s tax return “total tax” amount listed after nonrefundable credits (this was Line 24 on the 2025 return). Divide that number by four, and that is your baseline quarterly payment to meet the 100% Safe Harbor rule.
If you have questions about what you read, email: contact@sotecpa.com
