Quarterly Estimated Taxes: What the Self-Employed Need to Know Before June 15

If you are self-employed, a freelancer, or running a business where no one is withholding taxes from your income, the IRS expects you to pay as you go. That means quarterly estimated tax payments, and the second one for 2026 is due June 15.

Most people who are new to self-employment are surprised by this. When you had a W-2, your employer sent money to the IRS every pay period. Nobody does that for you now. If you wait until April to settle up for the full year, you may owe a penalty even if you pay the entire balance at filing.

Who Actually Needs to Pay Estimated Taxes

You generally need to make estimated tax payments if you expect to owe at least $1,000 in federal income tax for 2026 after accounting for any withholding, and if your withholding and refundable credits will cover less than a certain threshold of your total liability. This applies to:

• Sole proprietors and independent contractors

• Freelancers and consultants receiving 1099 income

• Partners in a partnership and S corporation shareholders

• Rental property owners with significant net income

• Anyone with investment income, capital gains, or other income not subject to withholding

W-2 employees can also owe estimated taxes if they have significant side income, investment income, or if their withholding is not covering their total liability.

The 2026 Quarterly Schedule

The four estimated tax payment due dates for 2026 are:

• Q1: April 15, 2026 (covers January through March income)

• Q2: June 15, 2026 (covers April and May income)

• Q3: September 15, 2026 (covers June through August income)

• Q4: January 15, 2027 (covers September through December income)

Despite being called quarterly payments, the periods are not equal. Q2 covers only two months. That is a quirk of the IRS schedule that has been in place for decades and is not going to change. Each installment is still expected to cover roughly 25% of your annual estimated tax regardless of how many months the period spans.

How Much to Pay: The Safe Harbor Rules

The IRS does not require you to calculate your 2026 tax liability with perfect precision. Instead, it provides safe harbor thresholds. If your payments meet one of these thresholds, you will not be charged an underpayment penalty regardless of what you ultimately owe when you file.

There are two main approaches:

Prior-year method: Pay 100% of your 2025 total tax liability spread across four equal installments. If your 2025 adjusted gross income was above $150,000, that threshold increases to 110% of your 2025 tax. Married filing separately, the threshold is $75,000. This is the simpler method because the number is already known.

Current-year method: Pay at least 90% of what you actually owe for 2026. This requires a reasonable projection of your current-year income, which can be difficult if your income is variable. If your estimate falls short and you end up underpaying, the penalty applies to the shortfall.

For most self-employed taxpayers with growing or variable income, the prior-year method is the cleaner approach. You know last year's number. You do not have to guess this year's.

Self-Employment Tax: The Number That Surprises People

When you were a W-2 employee, your employer paid half of your Social Security and Medicare taxes. That 7.65% never appeared on your pay stub because your employer handled it. When you are self-employed, you pay both halves. That is a 15.3% self-employment tax, generally calculated on 92.35% of net self-employment income, once net earnings from self-employment reach $400 or more, on top of federal income tax.

This is the thing that catches people who are new to self-employment. They set aside money for income tax and forget that SE tax exists. Someone earning $60,000 in net freelance income who plans for income tax alone is leaving a significant number uncovered. The SE tax on that amount is roughly $8,478, before a dollar of income tax is calculated.

The IRS does allow a deduction for half of the SE tax you pay, which reduces your adjusted gross income. That slightly lowers your income tax bill. But the overall burden for self-employed taxpayers is meaningfully higher than for W-2 employees at the same income level, and your estimated payments need to reflect that.

What Happens If You Miss a Payment or Underpay

Missing a quarterly deadline or underpaying does not trigger a separate penalty notice the way a missed filing deadline does. The IRS generally calculates the underpayment penalty after your return is filed and sends a bill if a penalty applies. In some cases you may need to file Form 2210, particularly if your income varied during the year, you are requesting a waiver, or you want to calculate the penalty yourself. The penalty is based on the federal short-term interest rate plus three percentage points, applied to the underpayment for the period it remained unpaid.

Underpayment penalties are calculated per quarter. If you skipped Q1 and Q2 and paid everything in Q3, you still owe the penalty for Q1 and Q2. Catching up later does not erase the earlier shortfall.

How to Make the Payment

Electronic payments are faster, give you immediate confirmation, and eliminate any risk of a check being lost or postmarked incorrectly. Your options:

• IRS Direct Pay at directpay.irs.gov: free, direct bank account withdrawal, available 24/7

• EFTPS (Electronic Federal Tax Payment System) at eftps.gov: requires advance enrollment but allows scheduling future payments

• IRS2Go mobile app: links to Direct Pay

• Check by mail with Form 1040-ES payment voucher: still works, but allows for postmark issues

Designate each payment correctly as a 2026 estimated tax payment for the right quarter. A mislabeled payment can create confusion on your account even if the money arrived.

Not Sure What You Owe? That Is the Right Time to Call.

Estimated tax calculations get complicated quickly when income varies, you have multiple income sources, or your 2025 return looked significantly different from prior years. Getting the number wrong in either direction has consequences: underpay and you owe a penalty; overpay and you have given the IRS an interest-free loan.

Jim O’Callaghan, CPA, works with self-employed individuals and business owners across Queens and Long Island to calculate accurate quarterly payments, account for SE tax, and make sure the safe harbor is covered. If the June 15 deadline is approaching and you are not confident in your number, getting clarity now can help avoid penalties and surprises later.

Glendale Office: 718-326-0500

Melville Office: 631-673-0617

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