How to Calculate and Pay Quarterly Estimated Taxes

Calculate quarterly estimated taxes using the 90% rule and safe harbor provisions to avoid IRS penalties on business income.

1. Calculate your expected annual tax liability. Add federal income tax, self-employment tax (15.3% on net earnings), and state taxes on your projected business profit. Use your prior year return as a baseline, then adjust for expected income changes. Include both ordinary income rates and the additional 0.9% Medicare tax on earnings over $200K.
2. Apply the safe harbor rule. Pay either 90% of current year's tax or 100% of last year's total tax (110% if prior year AGI exceeded $150K). Choose whichever amount is lower. This protects you from penalties even if you owe more at filing.
3. Divide by four and subtract withholdings. Take your required annual payment and divide by 4 for quarterly amounts. Subtract any tax withholdings from W-2 income, previous estimated payments, or quarterly payroll if you pay yourself a salary. The remainder is your quarterly estimated payment.
4. Submit payments by quarterly deadlines. Pay by January 15, April 15, June 15, and September 15 using Form 1040ES or online at irs.gov/payments. Include your SSN and tax year. State deadlines typically match federal dates but verify with your state tax authority.
5. Track and adjust throughout the year. Recalculate quarterly if income swings more than 20% from projections. You can pay different amounts each quarter as long as you meet safe harbor minimums annually. Keep records of all payments for tax filing.