When Should You Make Estimated Tax Payments? What Every Taxpayer Needs to Know

If you're self-employed, run a side hustle, or earn income from investments or rentals, there’s a good chance you need to be making estimated tax payments throughout the year. Unfortunately, many taxpayers are unaware of this requirement—and the IRS doesn’t accept “I didn’t know” as a defense against penalties.

What Are Estimated Tax Payments?

Estimated tax payments are quarterly payments made directly to the IRS to cover your income tax obligation as you earn income during the year. Unlike employees who have federal income tax withheld from each paycheck, self-employed individuals and side hustlers don’t have a built-in withholding mechanism. That means they must take the initiative to pay taxes on their income every quarter.

This “pay-as-you-go” system is how the IRS expects all taxpayers to meet their income tax obligations—not just once a year at tax time.

Why You Can’t Just Wait Until April

Some taxpayers try to leave their cash in the bank, collect interest, and pay their full tax bill in April when they file their return. Sounds smart, right? Not really.

The IRS imposes underpayment penalties if you haven’t paid in enough tax throughout the year. They assume your tax liability is paid in four equal parts—one per quarter. If you wait until April to pay, you may be paying 6–12 months late on some income, which can result in penalties and interest, even if you pay in full when filing.

Who Typically Needs to Make Estimated Payments?

You’re likely required to make estimated tax payments if you:

• Are self-employed or run a small business

• Earn freelance or 1099 income from a side hustle

• Receive investment income, such as dividends, capital gains, or interest

• Own rental properties

• Take retirement account withdrawals without enough tax withheld

• Had a major life change (marriage, job change, etc.) that reduced your W-2 withholding

In short, if you don’t have taxes automatically withheld from your income, you’re probably responsible for paying quarterly.

When You Don’t Need to Make Estimated Tax Payments

You typically don’t need to make estimated tax payments if:

• Your only income is from W-2 wages and your employer withholds enough tax

• You had no tax liability in the prior year, and you were a U.S. citizen or resident for the whole year

• You expect to owe less than $1,000 in total tax after subtracting withholding and refundable credits

• You qualify for a safe harbor by ensuring that your total payments through withholding and/or estimates will equal:

  • 100% of last year’s tax, or

  • 110% if your AGI was over $150,000

In these cases, the IRS won’t penalize you—even if you ultimately owe some tax when you file.

Key Due Dates for Estimated Tax Payments

Estimated tax payments are generally due on:

• April 15

• June 15

• September 15

• January 15 (of the following year)

Mark your calendar—these are firm deadlines, and late payments may incur penalties.

How to Avoid Estimated Payment Penalties

To stay in the clear, make sure to:

• Calculate your expected annual income and tax liability

• Divide the total tax into four equal parts

• Pay each installment on or before the quarterly deadline

Alternatively, if you have a W-2 job and a side gig, you can submit a new Form W-4 to your employer to increase withholding and cover the tax on your other income streams. This can help you avoid estimated payments altogether.

Bottom Line

If you don’t have taxes withheld from your income—because you’re self-employed, a landlord, or an investor—the IRS expects you to make quarterly estimated payments. Waiting until April can lead to expensive penalties.

Have questions about how much to pay or whether you even need to? A tax professional can help you run the numbers and ensure you're staying compliant—and penalty-free.

Helpful IRS Resources

• Estimated Taxes (IRS Overview)

• Form 1040-ES (Estimated Tax for Individuals)

• Publication 505 (Tax Withholding and Estimated Tax)