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Who needs to pay estimated taxes?

Who has to send the IRS tax during the year, and the two tests that decide it.

You need to pay during the year if you expect to owe $1,000 or more when you file, after withholding, and your withholding will not cover 90% of this year's tax or 100% of last year's. It mostly catches income nobody withholds tax from, such as self-employment, partnership and S corporation profit, rent and investment gains.

Last reviewed September 23, 2026 · Tax year 2026 · Federal and Florida

The tax system is pay-as-you-go. An employer withholds from every paycheck; when nobody withholds for you, the law expects you to send the money yourself, in four estimated payments across the year. Skip them and the IRS adds a penalty that runs like interest on each late payment.

The $1,000 test

There is no penalty for a year in which the tax on your return, reduced by what was withheld, is under $1,000. The tax that counts is wider than income tax. It includes self-employment tax and the 3.8% tax on net investment income. Self-employment tax alone comes to about 14.1% of net self-employment profit, so roughly $7,100 of profit reaches $1,000 before any income tax is counted.

How much is enough

You are safe if your withholding and estimated payments reach, a quarter at a time by each due date, the smaller of two amounts:

  • 90% of the tax on this year's return, or
  • 100% of the tax on last year's return, if you filed one and it covered a full 12 months.

If last year's adjusted gross income was over $150,000 ($75,000 if you file separately from your spouse this year), the second figure is 110% instead of 100%.

Last year's tax is the useful one. It is a number you already know, so paying it in four equal parts protects you even if this year's income jumps. Paying the whole amount late in the year does not: each quarter is measured on its own date. You still owe the full tax in April; the safe harbor only removes the penalty.

Who it usually catches

  • Self-employed people and freelancers. Nothing is withheld, and self-employment tax is added on top of income tax.
  • Partners and S corporation shareholders. The IRS names both. Your share of the business profit is taxed on your personal return whether or not it is paid out to you, and an employer withholds only on wages. An S corporation owner's salary is withheld on; the owner's share of the profit is not.
  • Landlords and investors. Rent, dividends, interest and capital gains usually arrive with nothing withheld.
  • Employees with a second source of income. A W-2 job can be under-withheld once side income or a spouse's income is added.

If you have a paycheck, raising your withholding on Form W-4 can be simpler than making estimated payments. Withholding counts as paid in equal parts on each due date, whenever during the year it was actually taken out, so a raise in the fall can still cover the spring.

Who does not have to, and who follows other rules

  • You had no tax liability last year, were a U.S. citizen or resident for all of it, and it was a full 12-month year.
  • Farmers and fishermen whose farming or fishing income is at least two-thirds of their gross income, this year or last, make one payment by January 15, sized at 66⅔% of the tax instead of 90%. They make none at all if they file and pay in full by March 1.
  • Corporations are under a different section. A C corporation pays estimated tax if it expects to owe $500 or more.

Florida

Florida has no personal income tax, so for individuals estimated payments are a federal obligation. A C corporation that expects to owe more than $2,500 of Florida corporate income tax makes Florida estimated payments as well.

When the four payments fall due, and how to size each one, is in Estimated tax due dates and how much to pay.

Sources

  1. IRC § 6654, failure by individual to pay estimated income tax
  2. IRC § 6655, failure by corporation to pay estimated income tax
  3. IRC § 1401, rate of self-employment tax
  4. IRC § 1402, definitions (net earnings from self-employment)
  5. IRC § 1411, net investment income tax
  6. IRC § 702, income and credits of partner
  7. IRC § 1366, pass-thru of S corporation items to shareholders
  8. IRC § 3402, income tax collected at source (withholding on wages)
  9. IRS, Estimated taxes
  10. IRS Publication 505, Tax Withholding and Estimated Tax
  11. Florida Constitution, art. VII, § 5 (no tax on the income of natural persons)
  12. Florida Statutes § 220.24, declaration of estimated corporate income tax

This article is general educational information, not tax, legal, or accounting advice, and does not create a client relationship. Tax law changes and depends on your specific facts. Information is current as of September 23, 2026 for tax year 2026; verify before acting. Consult a qualified CPA, EA, or attorney about your situation.

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