Estimated tax payments are quarterly payments sent to the IRS for income without automatic withholding, such as earnings from self-employment, investments, rent, or retirement distributions. Quarterly payments help manage your tax bill throughout the year and avoid penalties. You’re required to make these payments if you’ll owe at least $1,000 after withholding and credits, though special rules apply for farmers, fishers, and disaster victims.

Who Needs to Make Estimated Tax Payments?

Several groups typically need to make estimated tax payments:

Self-employed and small business owners must pay quarterly since their income typically isn’t subject to withholding. This group includes sole proprietors, LLC members, partners, and S-corporation shareholders.

Freelancers and gig economy workers like rideshare drivers, consultants, and independent contractors should pay quarterly if they expect to owe at least $1,000 after taxes withheld.

Investors with significant dividends or capital gains owe estimated taxes if their investment income leads to a tax bill of $1,000 or more at year-end.

Retirees receiving taxable retirement income from pensions, IRA withdrawals, or taxable Social Security should pay quarterly estimates if their withholding doesn’t cover their tax liability.

Rental property owners typically owe quarterly if their net rental income will result in taxes due of at least $1,000.

You’re generally required to make estimated payments if your withholding is less than 90% of your current year’s taxes or 100% of last year’s taxes (110% if your adjusted gross income exceeds $150,000).

The 2025 Estimated Tax Payment Schedule

The IRS divides the calendar into four uneven periods so that payments track typical cash‑flow patterns. If a due date lands on a weekend or federal holiday, it shifts to the next business day. States like California may have different quarterly payment structures, so it’s important to verify your state’s guidelines.

1st Payment Period

Income earned January 1 – March 31, 2025 | Payment due April 15, 2025

This aligns with the annual “Tax Day.” Use it to reconcile any 2024 refund you applied to 2025 and to catch up if first‑quarter profits surged. You may instead pay the entire year’s estimated liability on this date and skip later installments.

2nd Payment Period

Income earned April 1 – May 31, 2025 | Payment due June 16, 2025

Typically due June 15, this deadline shifts to June 16 because the 15th falls on a Sunday. This shorter earning window (two months) recognizes that most filers have already paid for Q1 and are still adjusting their withholding or bookkeeping systems.

3rd Payment Period

Income earned June 1 – August 31, 2025 | Payment due September 15, 2025

Summer bonuses, mid‑year partnership draws, and quarterly dividend payouts often land here. It’s crucial to adjust your estimate accurately at this point.

4th Payment Period

Income earned September 1 – December 31, 2025 | Payment due January 15, 2026

Holiday bonuses, mutual‑fund capital‑gain distributions, and year‑end consulting fees make this installment critical. You may skip it if you file your 2025 return and pay any balance by February 2, 2026—handy for taxpayers who close their books quickly.

Practical Tips from JTC CPAs

  • Automate Payments: Set up automatic payments through IRS Direct Pay or EFTPS to avoid missed deadlines.
  • Review Payments Regularly: If your income changes significantly, recalculate your payments mid-year to stay on track.
  • Increase Withholding if Possible: Increasing withholding from wages or pensions later in the year can help you avoid large payments at year-end.

Managing estimated taxes doesn’t have to be complicated. Stay ahead of deadlines and keep your finances organized. Reach out to JTC CPAs at (208) 947-2400—we’re ready to help you plan your estimated taxes to match your income and state requirements.

Staying Ahead of 2025 Estimated Taxes

When Estimated Tax Payments Come Up Short

Missing or underpaying your estimated taxes can lead to more than just an unexpected bill— it often triggers an underpayment penalty. This penalty kicks in when your estimated payments (plus withholding) fall short of either 90% of your 2025 tax liability or 100% of your 2024 tax, whichever is smaller. For 2025, the IRS interest rate used to calculate penalties is 8%, and it’s compounded daily.

To figure out how much you might owe, you’ll need Form 2210, which helps calculate the penalty based on the amount and timing of your payments. Many tax software programs automate this, but it’s still good to understand how it works.

There are some exceptions: the IRS may waive the penalty if your underpayment was due to a casualty, disaster, or unusual situation beyond your control. You’ll need to provide documentation and submit a waiver request along with Form 2210.

Even if the penalties are small, they can snowball and complicate future tax filings— so it’s definitely something you’re going to want to stay in front of.

Smart Moves for Managing Estimated Taxes

Estimated tax payments might seem like a nightmare, but rest assured, they don’t have to be stressful— with a few proactive steps, you can stay on top of them without scrambling every quarter.

One smart strategy is to set up a separate bank account just for tax savings. Automatically transferring a percentage of each paycheck or payment keeps you from spending funds you’ll need later.

Use a quarterly budgeting plan to forecast income and allocate for taxes well in advance. Even basic spreadsheets can work, but cloud-based tools make tracking easier and more accurate. Pair that with solid record-keeping habits—like saving receipts, invoices, and payment confirmations—and you’ll be in great shape for tax time.

Many people find success using tax software that tracks estimated payments and reminds them of due dates. Others prefer working with a bookkeeper or accountant, especially if income fluctuates or comes from multiple sources. If your income changes mid-year, don’t forget to adjust your estimated payments accordingly. The IRS allows you to revise amounts each quarter to reflect new projections.

2025 Tax Law Updates That May Impact Estimated Payments

As we head through 2025, a few IRS updates could impact your estimated tax strategy. For one, interest rates on underpayments remain at 8%, which continues a trend of elevated rates compared to prior years. There haven’t been changes to the 90%/100% payment thresholds, but minor tweaks in penalty calculations may affect high-income filers or those with uneven income streams.

The IRS also continues to encourage electronic filing and payment systems, like Direct Pay and EFTPS, and may expand requirements for certain taxpayers.

Lastly, while no major legislation has passed yet, there’s talk in Congress about adjusting thresholds for gig workers and increasing flexibility around quarterly payment schedules—something to keep an eye on moving forward.

If you have questions about your estimated taxes or want help staying on track in 2025, the team at JTC CPAs is here to help. Whether you’re looking for personalized advice or just want to make sure you’re doing things right, don’t hesitate to reach out—we’re happy to chat!

Calculating your estimated tax payments

Failure to accurately calculate your estimated tax payments, and remit them promptly to the Internal Revenue Service (IRS) can cost you more money in the form of penalties imposed by the IRS. Estimated tax payments are due quarterly—in the middle of January, April, June, and September.

You may be exempt from making estimated tax payments if you’re an employee. Your employer will typically withhold the taxes from your paycheck and pay the IRS on your behalf. It’s important to fill out Form W-4 and submit to your employer to ensure they’re withholding the correct amount.

However, if you’re self-employed or receive income asides from employment wages, you’ll most likely have to make estimated quarterly payments to the IRS using Form 1040-ES. For business owners, your business structure determines which income tax return form you have to file.

Regardless of your employment status, you’ll need to make estimated quarterly payments if the following apply:

  • You expect to owe at least $1,000 in taxes for the current tax year after deducting withholdings and refundable credits from the total amount
  • You expect your federal income withholding tax to be less than 90% of the total tax you will owe for the current year or 100% of the tax shown on your previous year’s return (110% if you earn over $150,000)

Step-by-step process for determining payment amounts: Different methods allowed by the IRS

Prior year tax liability safe harbor: Pay 100% of last year’s tax bill (110% if you earn over $150,000). This way you won’t be penalized for underpayment even if you end up owing more in the current tax year. This is why its known as “safe harbor.”

For example if you earn less than $150,000 and paid $40,000 last year, you’ll need to pay the exact amount for the current tax year ($10,000 quarterly). Whereas someone who earns over $150,000 and paid $65,000 last year will have to pay $71,500 ($17,875 quarterly), which is 110% of $65,000.

Current year projection method: This method involves estimating the total taxes due for the current year based on income projection. You’ll have to factor in last year’s income, current and anticipated income, and any deductions or credits you may qualify for. This helps you plan ahead, but you risk penalties for underpayment if not properly calculated.

Take for instance a business owner who paid $20,000 ($5,000 quarterly) the previous tax year, and estimates to double his annual revenue the present year. This means he’ll have to pay approximately $40,000 (10,000 quarterly) based on projections. However, if he ends up owing $50,000 at the end of the current tax year, he’ll owe penalties on the $10,000 underpayment.

Annualized income installment method: If your income fluctuates significantly throughout the year, this is the best method for remitting your income taxes to the IRS. You’ll only pay based on income you’ve already earned and avoid penalties on underpayments. You can calculate it using Form 2210. Form 2210 allows taxpayers to annualize income for each quarter and estimate tax payments for the year based on that.

To illustrate, Steve, a freelancer expects to owe $50,000 in taxes for the current year. However, he earns 0% of his projected annual income in the first quarter, 20% in the second quarter, 30% in the third quarter and 50% in the fourth quarter. Instead of quarterly payments of 12,500 , he’ll pay $0 in the first quarter, 10,000 in the second quarter, $15,000 in the third quarter, and $25,000 in the fourth quarter which comes out to $50,000.

Accounting for self employment taxes

Self-employment taxes are taxes paid by self-employed people and small business owners to the federal government to help fund Social Security and Medicare. It is calculated based on 92.35% of net earnings. You’re required to pay this tax if your net earnings exceed $400 annually.

The current self-employment tax rate is 15.3% (12.4% for Social Security and 2.9% for Medicare). It is filed using Form 1040. Unlike the Medicare tax which has no cap, Social Security tax is applied only to the first $176,100 of net income earned in 2025, a significant bump from $168,600 in 2024.

There are two deductions you can use to lower self-employment taxes. The IRS let’s you deduct half of 15.3% or 7.65% of the total tax rate from your income. You can also deduct half or 6.2% of your Social Security tax. This deduction is taken from your gross income to calculate your adjusted gross income (AGI).

To put into perspective, a business owner makes $150,000 net profit, the self-employment tax is calculated using 92.3% of that amount which is $138,450. The tax on the amount would be ($150,000 x 12.4%) + ($150,000 x 2.9%) = $22,950. When filing income tax return, the business owner can claim an above the line deduction for half of the tax amount which is $22,950 ÷ 2 = $11,475.

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