Quarterly Taxes

Quarterly Due Dates (Form 1040-ES)

Safe Harbor Rules

To avoid underpayment penalties, you must pay the lesser of:

• 100% of prior year tax liability divided by 4 (110% if prior year AGI exceeded $150K, or $75K if married filing separately)
• 90% of current year tax liability divided by 4

If your income is uneven throughout the year, you can use the annualized installment method (Form 2210, Schedule AI) to potentially reduce earlier quarter payments.

Estimation Formula

quarterly_payment = (projected_annual_income x effective_tax_rate) / 4
amount_due = quarterly_payment - payments_already_made_this_quarter

Without Wilson

1. Open a spreadsheet. In cell A1, enter your total income received year-to-date.
2. In B1, calculate projected annual income: =A1 / (MONTH(TODAY()) / 12).
3. In C1, enter your effective tax rate as a decimal (e.g., 0.30 for 30%).
4. In D1, calculate quarterly payment: =B1 * C1 / 4.
5. In E1, enter estimated tax payments already made this year.
6. In F1, calculate remaining per quarter: =D1 - (E1 / quarters_remaining).
7. Compare against your prior year total tax (from Line 24 of your prior 1040) divided by 4.
8. Pay the lesser of the two amounts to satisfy safe harbor.

Important Notes

• Self-employment tax (15.3% on 92.35% of net earnings) is separate from income tax. Include it in your effective rate.
• State estimated taxes are separate. Most states follow the same quarterly schedule but check your state's requirements.
• If you also receive W-2 income, you can increase withholding on your W-4 instead of making estimated payments.
• The penalty for underpayment is calculated per quarter, not annually. Late Q1 payments accrue penalties even if Q4 is overpaid.
• This is not tax advice. Consult a CPA or tax professional for filing decisions.