The U.S. tax system is pay-as-you-go. W-2 employees pay through withholding. Freelancers and sole props pay through quarterly estimated tax payments — Form 1040-ES.
Skip them and you'll owe an underpayment penalty (currently 8% annualized; reset quarterly by the IRS), even if you pay your full balance on April 15.
This is the working playbook for getting quarterlies right.
The four due dates
For tax year 2026:
| Period covered | Payment due | |---|---| | Jan 1 – Mar 31 | April 15, 2026 | | Apr 1 – May 31 | June 15, 2026 | | Jun 1 – Aug 31 | September 15, 2026 | | Sep 1 – Dec 31 | January 15, 2027 |
The "quarters" aren't equal calendar quarters — Q1 is 3 months, Q2 is 2, Q3 is 3, Q4 is 4. Use the actual periods above when you compute payments.
How to compute each payment
Three methods, pick one:
Method 1: Equal payments based on prior-year safe harbor (easiest)
Take last year's total tax, multiply by 110% (if your prior-year AGI was over $150K) or 100%, divide by 4. Pay that each quarter.
Example: 2025 total tax was $20,000, AGI under $150K. Safe harbor: $20,000 × 100% = $20,000. Each quarterly payment: $5,000.
This shields you from the underpayment penalty regardless of how much more you make in 2026. See estimated tax safe harbor for the full rules.
Method 2: Pay 90% of current-year liability
Project your full-year tax, multiply by 90%, divide by 4. Risky if income spikes mid-year — you may need to true up.
Method 3: Annualized income installment method (most accurate)
Use Form 2210 Schedule AI to compute each quarter based on actual income earned through that quarter. Best for highly variable income (e.g., a freelancer who earns $5K in Q1 and $50K in Q4). Time-consuming if done by hand; trivial if your bookkeeping is current.
What to include in each payment
The estimated tax covers:
- Income tax (federal)
- Self-employment tax (15.3% on 92.35% of Schedule C profit — see SE tax calculator)
- Additional Medicare tax (if applicable)
- Net investment income tax (if applicable)
- State income tax (separate state form, separate quarterly schedule for most states)
The IRS doesn't break this out on the voucher — you send one number. They allocate it on your return.
How to actually pay
Three options, in order of best to worst:
- EFTPS (electronic federal tax payment system) — free, schedules in advance, leaves a clear trail. Set up at eftps.gov; takes 5–7 business days for the activation PIN to arrive by mail.
- IRS Direct Pay — free, no enrollment, but no scheduling more than 365 days out and limited tracking.
- Paper voucher (Form 1040-ES) — if you must. Slow, prone to misapplication, almost never the right call.
Don't use a credit card unless you're chasing rewards aggressively — the processor fee (~1.85%) almost always outweighs the points.
State quarterlies
Almost every state with an income tax has its own quarterly schedule. Most mirror the federal due dates, but the safe harbor percentages and underpayment penalty rates vary. Check your state revenue department's site each year.
What happens if you skip
The IRS computes the underpayment penalty quarter by quarter on Form 2210. Currently 8% annualized (the rate updates with the federal short-term rate plus 3 points). For an under-payment of $5,000 spread across the year, the penalty runs roughly $200–$300.
Worse, if you skip too many quarters, the IRS can flag your account for closer review. Repeat offenders sometimes get hit with the failure-to-pay penalty (0.5%/month) on top of the underpayment penalty.
What if my income changes mid-year?
You can adjust mid-year. Reduce quarterly payments if a contract ends. Increase them if a big check lands. The annualized installment method (above) handles this cleanly if you're tracking books in real time.
The mistake to avoid: paying 4 equal payments based on a Q1 income projection that turns out to be 3× too high. You won't owe a penalty, but you've lent the IRS an interest-free loan you'll only get back at refund time.
Common pitfalls
- Forgetting state — federal and state are separate. Many sole props pay federal religiously and skip state, then get hit with state penalties in April.
- Not adjusting for spouse's withholding — if your spouse over-withholds via W-2, that counts toward joint safe harbor. You may not need quarterlies at all.
- Treating the trial-quarter shortfall as "I'll catch up in Q4" — the IRS computes the penalty per-quarter. Catching up in Q4 doesn't unwind the Q1–Q3 underpayment.
- Ignoring the prior-year safe harbor in a low-income transition year — if you had a great 2025 and a bad 2026, paying 100/110% of 2025's tax can wildly over-pay 2026.
How ExpenseGhost helps
ExpenseGhost projects your federal + state quarterly payment from your live Schedule C data, sends a reminder before each due date, and generates a printable EFTPS-ready voucher. The estimate uses prior-year safe harbor by default but can switch to annualized if your income is irregular. See the tax dashboard.
FAQ
Do I owe quarterlies in my first year of self-employment?
If you expect to owe $1,000+ in tax for the year and didn't have W-2 withholding to cover it, yes. The first-year safe harbor is 90% of current-year liability — you can't lean on a prior-year zero.
What if I pay everything in Q4?
You'll likely owe a penalty for Q1, Q2, and Q3 — even if your full-year balance is paid by April 15. The IRS computes the penalty by period.
Can I just over-withhold from a W-2 side gig?
Yes — W-2 withholding is treated as evenly paid throughout the year, regardless of when it was actually withheld. This is a popular trick for freelancers with W-2 spouses.
What if the due date falls on a weekend?
Bumps to the next business day. Confirm against the IRS calendar each year — Emancipation Day (April 16) sometimes pushes April 15 to April 17 or 18.
ExpenseGhost provides tax estimates and tax-ready exports. We are not a tax preparer and do not file returns. Estimates are informational — verify every number with a licensed tax professional before filing.