Do You Have to Pay Estimated Taxes: Who, Due Dates, and Penalties

You have to pay estimated taxes if you expect to owe at least $1,000 in federal tax for the year after subtracting your withholding and refundable credits. That single threshold is what determines whether quarterly payments are required, and it catches most people whose income arrives without tax already taken out: self-employed workers, freelancers, partners and S corporation shareholders, landlords, retirees drawing pensions without enough withholding, and investors with meaningful interest, dividends, or capital gains.¹

Two safe harbors let you skip estimated payments even if you’ll owe more than $1,000. Your withholding and credits need to cover either 90% of what you’ll owe this year, or 100% of what you owed last year. If your adjusted gross income last year was above $150,000 ($75,000 if married filing separately), the second figure rises to 110%.² Meeting either test means no penalty, whatever your final bill turns out to be.

Who Typically Gets Caught by the Rule

If your employer withholds federal tax from your paycheck and that withholding covers your liability, you’re done. The problem shows up when income arrives without withholding. Freelance and contract work, rental income, partnership and S corp distributions, retirement distributions with too little withheld, and investment gains all fall into this bucket.¹

Self-employment carries an extra layer. Beyond income tax, you owe self-employment tax at 15.3%, which covers both halves of Social Security (12.4%) and Medicare (2.9%).³ The Social Security portion applies to the first $184,500 of net self-employment earnings in 2026.⁴ Both income tax and self-employment tax count toward the $1,000 threshold, so even a modest freelance operation can trigger the requirement.

You Also Skip Payments if Last Year Was Zero

No estimated payments are required at all if your prior year had zero tax liability, you were a U.S. citizen or resident for the whole year, and that prior year covered a full 12 months.²

Withholding Instead of Quarterly Payments

If you have a W-2 job and pick up side income, you don’t have to send in separate quarterly checks. Submit a new Form W-4 to your employer and increase the amount withheld from your paycheck to cover the additional tax.⁵

There’s a real advantage to this route. Withholding is treated as paid evenly across the year, even if you crank it up in November. Estimated payments are credited only to the quarter you actually sent them. So if it’s October and you realize you’re behind, raising your W-4 withholding fixes the whole year, while one large fourth-quarter estimated payment doesn’t undo the Q1, Q2, and Q3 shortfalls.

How to Figure Your Payment

Form 1040-ES contains a worksheet that walks through the calculation. Start with your expected adjusted gross income for the year. Last year’s return is a reasonable starting point if your situation hasn’t changed much; if you started a business, sold property, retired, or had another major shift, work the numbers fresh.

Subtract the standard deduction or your expected itemized deductions from projected income. Apply credits you’ll claim, such as the child tax credit or education credits. Add self-employment tax if it applies. That gives you total expected tax. Then subtract expected withholding from wages, pensions, or other sources. If the remainder is $1,000 or more, divide by four for the quarterly amount.⁶

None of this is locked in. If your income shifts materially during the year, redo the math and adjust upcoming installments rather than waiting for April.

2026 Due Dates

The four periods don’t split the calendar evenly. For 2026:⁶

First payment (income from January 1 through March 31): due April 15, 2026
Second payment (April 1 through May 31): due June 15, 2026
Third payment (June 1 through August 31): due September 15, 2026
Fourth payment (September 1 through December 31): due January 15, 2027

When a deadline falls on a weekend or federal holiday, it moves to the next business day.⁷ Note the second period is only two months while the fourth is four. The June 15 deadline arrives just two months after the first one and catches people off guard.

You can skip the January 15 payment entirely if you file your 2026 return by February 1, 2027 and pay the full balance with the return.⁶

How to Send the Payment

IRS Direct Pay pulls funds straight from your bank account. No fees, no registration, and you get a confirmation number when the payment goes through.⁸ For most individuals it’s the simplest option.

IRS Online Account also handles estimated payments for free and gives you a running view of your payment history, balance, and scheduled payments.⁹ Setup requires identity verification.

EFTPS has been the long-standing option for scheduling payments up to a year in advance,¹⁰ but the IRS is phasing individuals off it. New individual enrollment closed in October 2025, and existing individual users are expected to move to Direct Pay or IRS Online Account by late 2026.¹¹

Credit and debit cards work through third-party processors, with personal card fees between 1.75% and 1.85% and commercial card fees between roughly 2.89% and 2.95%.¹² Those fees add up on quarterly payments, so bank methods usually win unless card rewards outrun the cost.

Paper checks and money orders can be mailed with a voucher from Form 1040-ES. The mailing address depends on your state, and the postmark date is your payment date. Certified mail gives you proof if a deadline is ever contested.

When Your Income Isn’t Steady

Equal quarterly payments assume income arrives at the same rate all year. That’s fiction for a consultant who lands a big Q3 contract, an investor who sells in November, or a seasonal business.

The annualized income installment method lets you size each quarter’s payment to the income you actually received during that period. Earn little in Q1 and a lot in Q3, and your first payment shrinks while your third grows. This can reduce or eliminate penalties for quarters when income was genuinely low.¹³

The trade-off is paperwork. You complete Schedule AI as part of Form 2210 and attach it to your return. Once you use the method for one quarter, you have to use it for all four.¹³

The Penalty for Underpaying

The underpayment penalty is an interest charge on each quarter’s shortfall, running from the day that installment was due until you pay it. The IRS sets the rate quarterly. For the first quarter of 2026 it is 7% per year, compounded daily.¹⁴

Each quarter stands on its own. Overpaying in Q4 doesn’t cancel out a Q1 shortfall, because interest on that Q1 gap has already been running for months.² Consistent quarterly payments matter more than a year-end catch-up.

The safe harbors are the real defense. Cover 100% of last year’s tax (110% if last year’s AGI topped $150,000) through withholding and payments and you owe no penalty this year, whatever your final liability. Cover 90% of the current year’s tax and you’re also clear. And if your total balance due after withholding and credits comes in under $1,000, no penalty applies.¹

You generally don’t have to compute the penalty yourself. The IRS figures it and sends a bill. If you want to include it on your return, or if you used the annualized method, Form 2210 handles the calculation.¹⁵

When the IRS Will Waive the Penalty

Two grounds for waiver are recognized: retirement or disability, and casualty or disaster.¹³

If you retired after reaching age 62 or became disabled in 2024 or 2025, and the underpayment traces to that change rather than neglect, check box A or B on Part II of Form 2210 and attach documentation of the retirement date and age, or the disability date.

For a casualty, disaster, or other unusual circumstance where the penalty would be unfair, attach a written explanation with supporting documents like police or insurance reports. In federally declared disaster areas, the IRS generally identifies affected taxpayers and applies relief automatically.

The IRS’s First Time Abate program, which forgives certain penalties for taxpayers with a clean history, does not apply to estimated tax underpayments. It covers failure-to-file and failure-to-pay only.¹⁶

State Estimated Taxes Are Separate

Most states with an income tax run their own quarterly system, often on a similar schedule but with different thresholds and sometimes different deadlines. State underpayment penalties operate independently of the federal ones. If you owe federal estimated payments, check whether your state expects them too.

1
Internal Revenue Service. Estimated Taxes
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Office of the Law Revision Counsel. 26 USC 6654 – Failure by Individual to Pay Estimated Income Tax
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Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes)
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Social Security Administration. Contribution and Benefit Base
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Internal Revenue Service. Pay As You Go, So You Won’t Owe: A Guide to Withholding, Estimated Taxes and Ways to Avoid the Estimated Tax Penalty
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Internal Revenue Service. 2026 Form 1040-ES Estimated Tax for Individuals
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Internal Revenue Service. Individuals 2
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Bureau of the Fiscal Service. EFTPS Payment Instruction Booklet
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Electronic Federal Tax Payment System. Welcome to EFTPS Online
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Internal Revenue Service. Pay Your Taxes by Debit or Credit Card or Digital Wallet
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Internal Revenue Service. 2025 Instructions for Form 2210 – Underpayment of Estimated Tax by Individuals, Estates, and Trusts
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Internal Revenue Service. Interest Rates Remain the Same for the First Quarter of 2026
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Internal Revenue Service. Instructions for Form 2210 (2025)
16
Internal Revenue Service. Administrative Penalty Relief