Tax Tip: Skip Quarterly Payments and the IRS Charges You Interest
The US taxes income as you earn it. If you'll owe $1,000 or more beyond withholding — freelancers, landlords, anyone with a side gig — the IRS expects four estimated payments a year. Miss them and the underpayment penalty (an interest charge that resets quarterly) applies even if you pay in full the following April.
How to do it
- Mark the four dates. For 2026: April 15, June 15, September 15, 2026, and January 15, 2027. (Note the quarters are uneven — Q2 covers only April 1 to May 31.)
- Use the safe harbor. The simplest no-penalty target: pay 100% of last year's total tax in four equal installments (110% if your prior-year AGI exceeded $150,000, or $75,000 married filing separately). Whatever you actually owe this year, no penalty can apply. Alternatively, pay at least 90% of this year's tax.
- Estimate with Form 1040-ES and pay via IRS Direct Pay or EFTPS. Keep confirmations.
- Skip the January payment if you file early. No January 15, 2027 payment is needed if you file your 2026 return by February 1, 2027 and pay the balance with it.
Watch out
- Withholding counts too. The 90%/100%/110% tests include both withholding and estimated payments. A W-2 job plus a side gig? Bump your W-4 withholding — it counts as timely even in December, unlike a late estimated payment.
- Uneven income? Use the annualized method. If most income lands late in the year, Form 2210's annualized installment method can shrink the penalty — but it requires extra paperwork.
- States have their own quarterlies. Most states with income tax run parallel estimated systems with their own dates and penalties. Don't fix the federal side and forget the state.
- First-year freelancers get no free pass. The prior-year safe harbor only helps if you had a prior year with tax. In year one, estimate 90% of the current year carefully.
Frequently asked questions
I have a W-2 job and a small side gig. Do I need quarterly payments?
Only if you'll owe $1,000+ beyond withholding. Often the easier fix is raising W-4 withholding at your main job — withholding is treated as paid evenly all year, which beats catching up with estimated payments.
What exactly is the penalty rate?
It's an interest rate on the underpaid amount, reset each calendar quarter (it has sat around 7–8% in recent years). It accrues per quarter from each missed due date, so earlier misses cost more.
Can I just pay the whole year's estimate in April?
You can pay everything with the first installment, but you can't pay nothing until January — each quarter's deadline stands on its own, and the penalty is computed quarter by quarter.
Sources
- IRS – Estimated tax: when and how to pay: https://www.irs.gov/faqs/estimated-tax
- IRS – 2026 Form 1040-ES (payment dates and vouchers): https://www.irs.gov/pub/irs-pdf/f1040es.pdf
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