Everything you need to know about Form 1040-ES

What is Form 1040-ES?

Form 1040-ES, Estimated Tax for Individuals, is the IRS package that lets taxpayers calculate and pay estimated federal income tax in quarterly installments throughout the year. The U.S. tax system is "pay as you go": if your income isn't subject to withholding (or withholding isn't enough), you're expected to make estimated tax payments using the 1040-ES vouchers. Form 1040-ES includes a worksheet to estimate the year's tax liability and four payment vouchers — one for each quarterly deadline.

Who needs to pay estimated tax?

You generally need to make estimated tax payments if you expect to owe at least $1,000 in federal tax for the year after subtracting withholding and refundable credits, AND your withholding and credits will be less than the smaller of 90% of the current year's tax or 100% of last year's tax (110% if last year's AGI was over $150,000). Self-employed individuals, partners, S-corp shareholders, sole proprietors, freelancers, investors with significant dividends or capital gains, landlords, retirees with pension or RMD income, and anyone with sizable side income typically owe estimated tax.

What you'll need to estimate?

Use Form 1040-ES's Estimated Tax Worksheet: project your expected adjusted gross income, taxable income, deductions, and credits for the year; calculate the expected tax liability; subtract expected withholding; divide the balance by four for each quarterly payment. The IRS Tax Withholding Estimator and prior-year tax software can help. Many taxpayers simply base payments on 100% (or 110%) of last year's total tax — the "safe harbor" that avoids underpayment penalties regardless of how much you end up owing.

Quarterly deadlines and how to pay?

Estimated tax payments are due on four dates each year: April 15 (for January 1–March 31 income), June 15 (April 1–May 31), September 15 (June 1–August 31), and January 15 of the following year (September 1–December 31). If a deadline falls on a weekend or holiday, the next business day applies. Pay using the 1040-ES voucher and a check by mail, or pay online with IRS Direct Pay, EFTPS (the Electronic Federal Tax Payment System), debit/credit card, or the IRS2Go app. Most taxpayers no longer need to mail the voucher when paying online.