Estimated Tax
Tax Glossary Term
Definition
Estimated tax refers to quarterly tax payments made directly to the IRS by individuals who receive income that is not subject to employer withholding. This includes self-employment income, freelance income, rental income, investment gains, alimony, and any other income where taxes are not automatically deducted. The US tax system is pay-as-you-go, meaning the IRS expects to receive tax payments throughout the year, not just in one lump sum at filing time. For most W-2 employees, this is handled through paycheck withholding. But if you have significant non-withheld income, you are expected to file Form 1040-ES and make payments four times per year. The quarterly due dates are 04-15, 06-15, 09-15, and 01-15 of the following year (moved to the next business day if a date falls on a weekend or holiday). Note that the quarters are not evenly spaced — Q2 is only two months. If you fail to pay enough through withholding and estimated payments, you may face an underpayment penalty calculated on Form 2210. The safe harbor rules let you avoid the penalty by paying at least 90.0% of your current-year tax or 100.0% of your prior-year tax (110.0% if prior-year AGI exceeded $150,000). Many taxpayers use the annualized income installment method if their income is uneven throughout the year, which can reduce or eliminate penalties for quarters where income was lower.
Example
Expected 2026 tax liability: $24,000
W-2 withholding covers: $12,000
Remaining to pay via estimated tax: $12,000
Quarterly payment: $12,000 / 4 = $3,000/quarter
Due dates: 04-15, 06-15, 09-15, 01-15