Quarterly Estimated Taxes for Small Businesses
The IRS is a pay-as-you-go system. If you don't have an employer withholding tax, you're expected to send four estimated payments a year — or pay a penalty.
Who has to pay quarterly
You owe quarterly estimates if you expect to owe $1,000 or more at tax time after withholding. That includes freelancers, S-Corp owners (on distributions), landlords, and anyone with significant investment income.
The 2024 deadlines
| Quarter | Covers | Due |
|---|---|---|
| Q1 | Jan–Mar | April 15 |
| Q2 | Apr–May | June 17 |
| Q3 | Jun–Aug | September 16 |
| Q4 | Sep–Dec | January 15 of next year |
The safe harbor (the easy way)
You avoid the underpayment penalty if you pay the lesser of:
- 90% of this year's total tax, OR
- 100% of last year's total tax (110% if last year's AGI was over $150K)
Most people just divide last year's tax by 4 and pay that each quarter. Done.
The annualized income method (for lumpy income)
If your income spikes in one quarter (year-end bonus, big project, asset sale), file Form 2210 with the annualized method. You only owe estimates proportional to when you earned the income.
How to pay
- IRS Direct Pay — free, direct from a bank account, instant confirmation
- EFTPS — government system, schedule payments months ahead
- Debit/credit card — small fee, useful for points
- 1040-ES voucher — old-school check by mail
State estimates too
Most states with income tax mirror the federal quarterly schedule (with their own forms). California, New York, and others have different percentages or due dates — check your state's rules.
What the penalty actually costs
The underpayment rate is the federal short-term rate plus 3% (8% as of 2024), calculated per day on the shortfall. Painful, but rarely huge — typically a few hundred dollars on a $10K shortfall.
Run your own numbers
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