Quarterly estimated taxes, without the penalty

The four dates

Income earned	Payment due
January 1 to March 31	April 15
April 1 to May 31	June 15
June 1 to August 31	September 15
September 1 to December 31	January 15 of the next year

The "quarters" aren't equal: the second one is only two months long, and the last is four. When a due date falls on a weekend or federal holiday, it moves to the next business day. For tax year 2026, the last payment is due Friday, January 15, 2027.

Who has to pay

The rule is simple: if you expect to owe at least $1,000 in federal tax after subtracting withholding and refundable credits, you should be making estimated payments. That usually means:

• Self-employed people, freelancers and gig workers paid on a 1099
• Partners and S-corp owners whose profit passes through to their personal return
• Landlords with rental profit
• Retirees with pension or IRA withdrawals that have little or no withholding
• Anyone who sold stock, a business or property at a large gain

Remember that self-employment income carries self-employment tax (15.3% on most of your profit) on top of income tax. That's why first-year business owners are so often caught short.

The safe-harbor rule

You don't have to predict this year's tax perfectly. You avoid the underpayment penalty if your withholding and estimated payments, made on time, add up to the smaller of:

• 90% of this year's tax, or
• 100% of last year's total tax, or 110% if last year's adjusted gross income was over $150,000 ($75,000 if married filing separately).

The prior-year option is the one we use most. Take last year's total tax from your return, multiply by 100% or 110%, subtract what will be withheld, and divide by four. You'll know your payments in January, and a good year won't bring a penalty with it.

Safe harbor protects you from the penalty, not the tax. If your income jumped, you'll still owe the difference in April, so set it aside.

How much to set aside

A common starting point is to move 25 to 30% of every business payment into a separate savings account. It isn't a precise number. Your actual rate depends on your bracket, deductions, and whether Indiana and county tax are included. Treat it as a floor until someone runs your real figures. For a quick federal number, slide your revenue and expenses into the LLC tax calculator; it suggests a quarterly payment.

How to pay

You can pay through IRS Direct Pay from a bank account, through EFTPS, from your IRS online account, or by mailing a check with a Form 1040-ES voucher. Whichever you use, keep the confirmation number. Indiana has its own estimated payments too, filed on Form IT-40ES, and they include county tax.

If you or your spouse has a W-2 job

There's an easier route. Withholding counts as if it were paid evenly through the year, no matter when it happens. Raising withholding on a W-2 paycheck (Step 4(c) on the W-4) can cover a side business's tax without any quarterly vouchers. It can even rescue a year where you missed an estimate, if you raise it in the fall.