Quarterly estimated payments, explained properly

If income arrives without withholding — self-employment, rental property, large investment gains, a pension you set up wrong — the tax system still expects to be paid through the year. Four times a year, in fact.

The dates aren't quarters

This surprises people. The payment periods are uneven:

• April 15 covers January through March
• June 15 covers April and May — two months, not three
• September 15 covers June through August
• January 15 of the following year covers September through December

Miss the structure and you'll under-pay in June every year.

The safe harbour is the useful part

You don't have to predict this year's income correctly. Pay in at least as much as one of these and no underpayment penalty applies, no matter what you end up owing:

• 90% of what you owe for the current year, or
• 100% of what you owed last year — 110% if your income was above $150,000

That second option is the one to use. Last year's number is a known quantity sitting on a return you already filed. Divide it by four, pay that four times, and you have removed the penalty risk from a year whose income you can't yet forecast.

Paying

Use IRS Direct Pay from your bank account. It's free, it's immediate, and you get a confirmation number — keep it. Your state almost certainly wants its own estimated payments too, on its own schedule.

If you've already missed one

Pay it now rather than waiting for the next date. The penalty is calculated per period on the amount underpaid, so it accrues from the missed date until you pay. Catching up in September on a payment missed in June costs less than catching up in January.

And if this is the year you discovered any of it, that's normal. The first year of self-employment is the year everybody learns this. The second year is the one where it should be automatic.