Quarterly Estimated Taxes: The September 15 Deadline Is Coming

When I first did contracting work in my mid-20s, I learned this lesson the hard way.

I had been working for a company. I moved out West, and the company still wanted to use me part-time to consult with them and do some work as an outsource. That first year I did well for a side job. It was very exciting. I spent the money. I did not think of anything around taxes.

At the end of the year, I got killed. I got killed because I had no deductions. I got killed because I did no tax planning, especially estimated taxes.

That inspired me to get very smart about tax law very quickly. I’ve stayed up on it ever since. Ultimately, it’s your responsibility — and estimated taxes are the same way.

If you have income that doesn’t have taxes withheld — side business, freelance work, investment income — you’re supposed to pay taxes quarterly, not just in April. A lot of people don’t know this, or they know it but ignore it and get hit with penalties.

Estimated taxes aren’t complicated once you understand the rules. And the penalties for getting it wrong are annoying but not catastrophic. This is figure-outable.

The Tax Lag Problem

Here’s what trips people up: you earn money now, but the taxes come due later. There’s a lag between when you make the money and when you owe on it. If you’re not setting aside money throughout the year, you won’t have it when the bill arrives.

This is especially dangerous with self-employment income because nothing is withheld automatically. The money hits your account and feels like it’s all yours. It’s not. Roughly 20-30% of it belongs to the government.

Who Actually Needs to Pay Estimated Taxes?

The general rule: if you expect to owe $1,000 or more in federal taxes after subtracting withholding and credits, you should be paying estimated taxes.

This typically includes self-employed people and side business owners, freelancers and 1099 contractors, people with significant investment income like dividends or capital gains or rental income, retirees with pension or withdrawal income that doesn’t have enough withheld, and anyone whose W-2 withholding doesn’t cover their total tax liability.

Who can skip it: if your W-2 withholding covers your tax bill, you’re fine. If you expect to owe less than $1,000, you’re fine.

The Deadlines

Estimated taxes are due four times a year.

Q1 is due April 15, for income earned January through March. Q2 is due June 15, for income earned April and May — yes, this is only 2 months. Q3 is due September 15, for income earned June through August. Q4 is due January 15 of the following year, for income earned September through December.

If the deadline falls on a weekend or holiday, it moves to the next business day.

Important: these are payment deadlines, not “figure it out later” deadlines. If you earn money in Q2 and don’t pay estimated taxes until April, you’ll owe penalties on the late payment. Even if you dump it all at the end of the year, the IRS can still hit you with a penalty because the payments were late.

The most common mistake is just not paying attention to when it’s due. This is one of those things where it costs you real money. Set up a reminder a week before each quarterly tax payment is due.

How to Calculate What You Owe

There are two main approaches.

Approach one: the safe harbor rule. If you pay estimated taxes equal to 100% of last year’s total tax liability — or 110% if your adjusted gross income was over $150,000 — you avoid the underpayment penalty, even if you end up owing more in April.

Divide last year’s tax by 4 and pay that amount each quarter.

Example: you owed $12,000 in total federal taxes last year. Pay $3,000 per quarter this year. Even if your income goes up and you owe more in April, you won’t owe penalties because you met the safe harbor.

Approach two: calculate based on current income. This is what I do. I base it on how much I’m declaring as profit. If you have a simple spreadsheet and you keep track of your expenses and how much you’re taking in, as a rough starting point, about 20% of your profit should be going out in estimated taxes.

This is a little better than the “year before” method because the year might be bigger or smaller. It keeps your payments in tune with what you’re actually making.

The problem with using last year: I talked to someone a couple weeks ago who admitted she’d put aside way too much in estimated taxes because she based it on the previous year — where she’d made a lot of money by chance. This year was a lot slower. That money had been tied up with the federal government.

Remember: ideally you’re not getting a refund. A refund just means the government borrowed your money and is now giving it back to you. It was never owed. The more you give them ahead of time, the less flexibility you have in your life.

How to Actually Pay

Online is the easiest. Go to IRS.gov/payments and use Direct Pay, which is free and pays from your bank account, or pay by card if you don’t mind the fees.

By mail works too. Send a check with a Form 1040-ES voucher to the IRS.

EFTPS — the Electronic Federal Tax Payment System — is the IRS’s payment system for businesses. You can schedule payments in advance.

My system is a modernized version of the envelope method. A lot of people our age grew up with variations on the “envelope system” for budgeting — you set up an envelope at the beginning of the month for each key expense like rent, groceries, utilities. When you get paid, you put the amount in each envelope so you know exactly how much you’ve set aside.

I use a variation of this for estimated taxes. I have a simple account — an adjunct to my main business account — where it’s separate from everything else. When I set aside taxes at the end of the month, I put it in that account. When I’m ready to pay my estimated taxes, I transfer it all into my business checking.

It makes it a lot easier to know that the money is no longer yours. And with the ease of setting up additional accounts within a given bank, it’s super simple to do.

Don’t Forget State Taxes

If you live in a state with income tax — most do — you probably owe state estimated taxes too. The rules and deadlines vary by state, but the concept is the same.

Forgetting state taxes is one of the most common mistakes I see.

Check your state’s estimated tax requirements. Many states follow the federal schedule, but not all.

The Safe Harbor

If your income last year was $150,000 or less: pay 100% of what you owed last year, divided by 4. That’s your quarterly payment. Even if you make more this year and owe more in April, you won’t owe penalties.

If your income last year was over $150,000: pay 110% of what you owed last year, divided by 4.

Alternatively: pay 90% of what you’ll owe this year, divided by 4. This is more accurate but requires estimating your current-year income, which is harder.

The bottom line: the safe harbor is your protection. If you pay at least 100% or 110% of last year’s tax throughout the year, the IRS can’t penalize you for underpayment — even if your income doubled and you owe a lot more in April.

The Penalty Isn’t the End of the World

The underpayment penalty is calculated based on how much you underpaid and how long the payment was late. For 2026, the penalty rate is roughly 7-8% annually, depending on the quarter.

Example: if you should have paid $2,000 in Q2 but paid nothing until you filed in April, you might owe $50-100 in penalties depending on the rate.

That’s annoying, but it’s not catastrophic. The real problem is the April surprise — suddenly owing $8,000 or $15,000 that you didn’t plan for.

A cautionary tale: I know somebody who didn’t pay estimated taxes, and it led to avoidance of paying their taxes entirely because they couldn’t afford the bill. At the end of the day, it took years for them to pay back the original plus the interest. So much money went into it — so much more than what they originally owed.

The Bottom Line

Estimated taxes aren’t complicated; they’re just a system you need to set up and maintain. Once you have a routine- calculate what you owe, set aside money each month, pay quarterly- it runs on autopilot.

If you haven’t made a payment yet, make one this week — even if it’s not perfect. The September 15 deadline is your chance to get it right. Calculate what you owe, make a payment, and set up a system going forward.

It’s one of those things where a little diligence saves you real money.