Who Must File Quarterly Taxes

Who must pay quarterly taxes?

Individuals, including self-employed individuals, business owners, investors, and others, must generally pay quarterly estimated taxes if they expect to owe $1,000 or more in federal taxes for the year and their withholding and credits won't cover their full tax liability. Corporations must make estimated payments if they expect to owe $500 or more.

The IRS wants Individuals, including sole proprietors, partners, and S corporation shareholders, generally have to make estimated tax payments if they expect to owe tax of $1,000 or more when their return is filed.

Corporations generally have to make estimated tax payments if they expect to owe tax of $500 or more when their return is filed.

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People and businesses often need to make quarterly estimated payments on income not subject to standard tax withholding, such as:

• Self-employed individuals: Sole proprietors, partners, independent contractors, freelancers, and gig workers.

• Investors: Individuals with significant income from interest, dividends, or capital gains from selling assets.

• Landlords: Those who earn rental income.

• Recipients of other non-wage income: This includes alimony, prizes, and awards.

• W-2 employees whose regular paycheck withholding is not enough to cover their total tax bill.

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‍Requirements to Avoid Penalties (Safe Harbor Rules)

Generally, to avoid an underpayment penalty, you must pay enough tax throughout the year to cover either:

• 90% of your expected tax liability for the current year, or

• 100% of the total tax shown on your previous year's tax return

For higher-income taxpayers (those with an Adjusted Gross Income over $150,000, or $75,000 if married filing separately), the prior-year liability threshold increases to 110%.

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How do you pay your estimated taxes?

Our tax advisors can help you. As an IRS approved e-File provider, we can submit your estimated taxes using the Electronic Federal Tax Payment System (EFTPS), which is the easiest way for individuals as well as businesses to pay federal taxes.

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Is there any penalty for not paying estimated taxes?

Yes, the IRS imposes a penalty for the underpayment of estimated taxes if you do not pay enough tax throughout the year through withholding or quarterly estimated tax payments. This penalty is essentially an interest charge for the use of money that should have been paid to the U.S. Treasury earlier.

Penalty Details

• When it applies: You generally face a penalty if you owe $1,000 or more in taxes when you file your return, after subtracting your withholdings and credits. The penalty can apply even if you are due a refund at the end of the year if your payments were not made on time in each payment period.

• How it's calculated: The penalty is based on the amount of the underpayment, the period the underpayment was due and unpaid, and a quarterly interest rate set by the IRS. For individuals, the interest rate for the entirety of 2025 is 7% per year.

• Failure-to-Pay penalty: In addition to the underpayment penalty, if you don't pay the total amount owed by the tax filing deadline (typically April 15), you may also be charged a separate failure-to-pay penalty of 0.5% of the unpaid taxes for each month or part of a month the tax remains unpaid, up to a maximum of 25%.

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