Generally, self-employed individuals and small business owners must pay estimated taxes to stay compliant with the Internal Revenue Service (IRS).
What are Estimated Taxes?
Estimated taxes are tax payments made quarterly by self-employed individuals and small business owners to avoid penalties and interest for underpayment at the end of the year. It covers income tax, as well as Social Security and Medicare taxes.
Who Needs to Make Estimated Tax Payments?
The IRS requires taxpayers to pay taxes as they earn income-which is the basis for employers to withhold taxes from their employees’ paychecks. However, small business owners and self-employed individuals such as locum tenens, freelancers, or gig workers may need to pay quarterly estimated taxes to fulfill their tax obligation.
Furthermore, salaried employees may still need to make estimated tax payments if they have low tax withholding or they receive income from other sources like rental, dividends, capital gains, or retirement distributions.
As a rule, you may have to make estimated tax payments if you expect to owe tax of at least $1,000 when you file your return. To figure your estimated taxes, you may use the worksheet in the Form 1040-ES, Estimated Tax for Individuals. You may pay online, via mail, by phone or from your mobile device using the IRS2Go app.
The 2025 Estimated Tax Deadlines
Here are the estimated tax deadlines in 2025:
| Estimated Tax Payment | Covered Period | Due Date |
| 4th Quarter (from 2024) | Sep. 1 to Dec. 31, 2024 | Jan. 15, 2025 |
| 1st Quarter – 2025 | Jan. 1 to Mar. 31, 2025 | Apr. 15, 2025 |
| 2nd Quarter – 2025 | Apr. 1 to May 31, 2025 | Jun. 17, 2025 |
| 3rd Quarter – 2025 | Jun. 1 to Aug. 31, 2025 | Sep. 16, 2025 |
| 4th Quarter – 2025 | Sep. 1 to Dec. 31, 2025 | Jan. 15, 2026 |
Why the 4th Quarter Deadline on January 15 Matters
The 4th quarter deadline for estimated tax payment is especially significant because it marks the chance to settle your tax obligation and avoid underpayment penalties and interest. It is your final opportunity to correct any underpayments made from earlier quarters.
Understanding the IRS Safe Harbor Rule to Avoid Underpayment Penalties
The IRS recognizes that figuring out an accurate tax liability can be a complex and challenging task especially for those who have variable income such as business owners and self-employed individuals. Hence, they provided a way to help taxpayers avoid underpayment penalties with the Safe Harbor Rule.
With the safe harbor provision, taxpayers won’t be charged with underpayment penalties if they:
- Owe less than $1,000 in tax after subtracting withholdings and credits, or
- Paid at least 90% of their current tax year’s obligation or 100%* of the tax shown on their prior year’s return
*110% for high-income earners with Adjusted Gross Income (AGI) of $150,000 or more in their prior tax year (or $75,000 if married filing separately).
Tips to Further Avoid Tax Underpayment Penalties
If you fail to pay enough taxes throughout the year, you may have to pay underpayment penalties and interests. Below are some of the ways to avoid them:
- Set aside funds regularly. Avoid financial stress by setting aside a portion of your income as you earn them. This will ensure that you have enough funds to pay your taxes by due date.
- Make the best estimate and pay your taxes on time. If you have a seasonal kind of business or your income varies significantly, adjust your calculations per quarter to avoid underpayment penalties.
- Consider working with 1099 Accountant. We provide professional tax and financial guidance that will help you stay compliant with the complex and every changing IRS’ requirements.
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