Quarterly estimated taxes: why the IRS doesn't wait until April

If you're on a 1099 or run a business, your tax is due four times a year, not once.

Why it works this way

The US system is pay-as-you-go. On a W-2, tax is withheld from every paycheck automatically. Self-employed people and business owners have no withholding, so they pay estimated tax themselves in four installments during the year.

Due dates

April 15, June 15, September 15 and January 15 of the following year. Yes, the second and third payments aren't three months apart. That's how the IRS sets them.

What happens if you pay once a year when you file

The underpayment penalty is not charged once at the end. It accrues for each quarter where a payment was missed or too small.

How to avoid it

There is a safe harbor: pay at least as much as last year's total tax (110% if last year's income was high), and no penalty applies even if this year's tax turns out higher.

A common reason people don't pay

Nobody warned them in their first year on a 1099. Or income grew mid-year and they forgot to recalculate. The fix is the same in both cases: recalculate the remaining payments now instead of waiting for April.

Not sure whether you need to pay quarterly? Write to me and I'll look at your situation.