How to Pay Quarterly Taxes as a Sole Proprietor

To pay quarterly taxes as a sole proprietor, you estimate your yearly income and self-employment tax using IRS Form 1040-ES, then send four payments to the IRS on set dates through EFTPS, IRS Direct Pay, a debit or credit card, or a mailed check with the voucher. Because no employer is withholding tax from your business income, the IRS expects you to pay as you earn, and if you expect to owe $1,000 or more when you file, the quarterly schedule is generally mandatory.1Internal Revenue Service. Estimated Taxes

Do You Actually Owe Quarterly Payments

The trigger is simple. If you expect to owe at least $1,000 in tax for the year after subtracting any withholding and refundable credits, you’re on the hook for estimated payments.1Internal Revenue Service. Estimated Taxes That $1,000 counts both your income tax and your self-employment tax combined, so even a modest side business can cross the line.

You get a pass in a few situations. If your total tax due after withholding and credits is under $1,000, no penalty applies.2Internal Revenue Service. Topic No. 306, Penalty for Underpayment of Estimated Tax First-year sole proprietors who had zero tax liability in the prior year also qualify for the prior-year safe harbor at $0. And if you also hold a W-2 job with enough withholding to cover your entire liability, you can skip separate quarterly payments.

Two boundaries worth flagging. Farmers and commercial fishers who get at least two-thirds of gross income from those activities follow a different schedule with a single January 15 payment, or full payment by March 1.3Internal Revenue Service. Farming and Fishing Income And state estimated taxes are entirely separate; most states with an income tax run their own quarterly system with their own thresholds and deadlines.

Calculating What Each Payment Should Be

Form 1040-ES contains a worksheet that walks through the whole projection, then divides the annual number by four.4Internal Revenue Service. About Form 1040-ES, Estimated Tax for Individuals You’re really calculating two taxes stacked on top of each other.

Self-Employment Tax

This is your Social Security and Medicare contribution. The combined rate is 15.3% — 12.4% Social Security and 2.9% Medicare.5Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes) You don’t apply it to your full net profit. First multiply net earnings by 92.35% to get the taxable base, then apply the 15.3%.6Internal Revenue Service. Topic No. 554, Self-Employment Tax

The 12.4% Social Security portion stops at the annual wage base, which is $184,500 for 2026.7Social Security Administration. Contribution and Benefit Base The 2.9% Medicare portion has no ceiling. An additional 0.9% Medicare tax applies to net self-employment earnings above $200,000 (single) or $250,000 (married filing jointly).8Internal Revenue Service. Questions and Answers for the Additional Medicare Tax

You then get to deduct half of your self-employment tax when figuring adjusted gross income. That reduces your income tax only, not the SE tax itself.5Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes) The 1040-ES worksheet has a sub-worksheet that runs this deduction for you.9Internal Revenue Service. IRS Form 1040-ES – Estimated Tax for Individuals

Income Tax

From AGI, subtract either the standard deduction or your itemized deductions. For 2026 the standard deduction is $16,100 for single filers, $32,200 for married filing jointly, and $24,150 for head of household.10Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026

Most sole proprietors can also take the qualified business income deduction, worth up to 20% of net business income. It’s a separate line on the 1040-ES worksheet and reduces income tax only, not SE tax.9Internal Revenue Service. IRS Form 1040-ES – Estimated Tax for Individuals The QBI deduction phases out at higher income levels and works differently for certain service businesses, so read the instructions closely if your taxable income sits well above the standard deduction.

Apply the current tax brackets to what remains, subtract any credits you expect, then add back the full self-employment tax. That total is your projected annual liability. Divide by four to get each quarterly payment.

The Safe Harbor Shortcut

Projections are rarely exact, and you don’t have to be exact. You avoid the underpayment penalty if your total payments hit either of these:

The prior-year figure is popular because it’s a fixed number you already know. Pay a quarter of it four times and you’re safe, regardless of how the current year plays out. If your income shifts significantly mid-year, redo the worksheet and adjust the remaining installments.

The Four Deadlines

Quarterly payments for 2026 don’t sit on tidy three-month intervals:

  • 1st payment: April 15, 2026 (January through March income)
  • 2nd payment: June 15, 2026 (April and May income)
  • 3rd payment: September 15, 2026 (June through August income)
  • 4th payment: January 15, 2027 (September through December income)

When a due date lands on a weekend or legal holiday, it moves to the next business day.12Internal Revenue Service. Estimated Tax for Individuals You can skip the January 15 payment entirely by filing your full 2026 return and paying any balance by February 1, 2027.9Internal Revenue Service. IRS Form 1040-ES – Estimated Tax for Individuals

A filing extension does not extend these deadlines. An extension buys you time to file, not time to pay.13Internal Revenue Service. Topic No. 304, Extensions of Time to File Your Tax Return

How to Send the Payment

The IRS offers four practical routes. Electronic options give you instant confirmation and a cleaner audit trail.

EFTPS

The Electronic Federal Tax Payment System is the IRS’s own payment platform and the best fit for recurring quarterly payments. You enroll once, link a bank account, and can then schedule payments up to 365 days in advance.14Internal Revenue Service. Electronic Federal Tax Payment System: A Guide to Getting Started That means you can queue all four quarters at once. Enrollment takes up to five business days, so set it up before you need it.15Internal Revenue Service. EFTPS: The Electronic Federal Tax Payment System

IRS Direct Pay

For a one-off payment with no registration, IRS Direct Pay draws directly from a checking or savings account. You can submit up to five payments a day, each up to $10 million.16Internal Revenue Service. Direct Pay Help When you submit, pick “Estimated Tax” as the reason and select the correct tax year and quarter so the payment gets applied where you want it.

Check or Money Order

Mail a check or money order with the payment voucher from Form 1040-ES. Make it payable to “United States Treasury” and write your name, address, Social Security number, daytime phone number, the tax year, and “Form 1040-ES” on the check. The IRS corrected the mailing addresses on the 2026 Form 1040-ES in February 2026, so download a fresh copy if you printed the form earlier.17Internal Revenue Service. Correction to the Mailing Addresses in the 2026 Form 1040-ES

Credit or Debit Card

Card payments go through authorized third-party processors and carry fees. Personal credit card fees currently run about 1.75% to 1.85%; commercial cards run higher, up to roughly 2.95%.18Internal Revenue Service. Pay Your Taxes by Debit or Credit Card or Digital Wallet On a $5,000 payment that’s roughly $88 to $93 in fees, so bank transfer is usually cheaper unless card rewards clearly offset the cost.

When Your Income Is Uneven

Equal quarterly installments assume steady income. If yours isn’t (seasonal work, a big project that lands in one quarter, a slow first half), the annualized income installment method lets you match each payment to the income you actually earned in that period.

You claim it after the fact by completing Schedule AI on Form 2210 and checking Box C in Part II.19Internal Revenue Service. Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts Schedule AI breaks the year into cumulative periods (January–March, January–May, January–August, and the full year) and works out the correct installment for each. It doesn’t change your deadlines, but it can eliminate a penalty that came from a lean early quarter followed by a strong later one.

If You Underpay

Missing a quarter or coming in short (and missing both safe harbors) triggers a penalty that runs like interest on the underpaid amount. The rate is the federal short-term rate plus three points, recalculated each quarter. It’s 7% per year for early 2026, compounded daily.20Internal Revenue Service. Interest Rates Remain the Same for the First Quarter of 2026 The clock runs from the missed due date until you pay or file your annual return, whichever comes first.

The IRS usually calculates the penalty and bills you. You can compute it yourself (or use the annualized method) on Form 2210.21Internal Revenue Service. Instructions for Form 2210 Waivers are limited, but two grounds exist: a casualty, disaster, or unusual circumstance where a penalty would be unfair; and recent retirement (after age 62) or disability where the underpayment was due to reasonable cause.22Internal Revenue Service. Underpayment of Estimated Tax by Individuals Penalty Taxpayers in federally declared disaster areas generally receive relief automatically without filing Form 2210.23Internal Revenue Service. Instructions for Form 2210 (2025)

Records to Keep

The IRS puts the burden of proof on you to substantiate what’s on your return, and that includes proof of estimated payments.24Internal Revenue Service. Recordkeeping EFTPS and Direct Pay generate confirmation numbers; save those alongside the corresponding bank debits. For checks, keep a copy of the check, the voucher, and a record of the mailing date.

Also hold onto your 1040-ES worksheet, the prior-year return you used for the safe harbor, and the income and expense records behind your projections. Keep everything at least three years from the filing date of the return it supports.