Quarterly Estimated Taxes: How to Pay When Your Income Swings
How much should you send the IRS each quarter when you don't know what next month pays?
A listener named Travis asked me this. He's a freelance web designer. Some months he makes $3,000, some months $7,000. Last year he paid nothing until April and got hit with a bill plus a penalty.
You might be thinking, "Ralph, I filed correctly, so why the penalty?" Because the IRS wants to be paid as you earn, not once a year.
Why Quarterly Estimated Taxes Exist
When you work for someone else, they withhold taxes from every paycheck. When you work for yourself, nobody does that for you. The IRS set up four payments instead.
They aren't exactly on the quarters. The dates are April 15, June 15, September 15, and January 15. April is the worst one, because you may owe last year's balance and your first payment on the same day.
The Safe Harbor Rule
You generally avoid the underpayment penalty if you pay at least 90% of this year's tax or 100% of the total tax on last year's return, whichever is smaller. If your income is over $150,000, the prior-year number goes to 110%. The IRS spells out the rules here.
One correction to something I said on air: the penalty is figured on each due date. Paying a big chunk in January doesn't erase a skipped payment in April. If your income comes in lumps, the IRS lets you pay unevenly using the annualized income method on Form 2210. Ask your accountant about it before you rely on it.
Open a Tax Account This Week
Here's the habit that fixes most of this.
1. Open a separate account. Call it the tax account.
2. Move a percentage the day you get paid. I use 20%, or whatever your accountant says fits you.
3. Send it in at each due date. If you have $2,000 in the account, that's your payment.
Overpay a little and you get a refund, though the IRS pays no interest on it. And if your income drops, the money is still yours.
No Shame, Just a Tax Account
Travis, you don't need to predict next month. You need a place for the money to land first.
Open the account.
Move the percentage.
Send it on time.
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Send in your money question and we'll get to it on the show.
Licensed Public Accountant
Ralph V. Estep, Jr. is a Delaware-based Licensed Public Accountant (LPA), author, rancher, and media host with more than 30 years of experience in finance, taxation, and small-business leadership. As the founder of Saggio Accounting+PLUS and the creator of the Ask Ralph Media network, Ralph helps entrepreneurs, creators, and everyday families replace money confusion with clarity, confidence, and practical next steps — without shame and without hype.
Ralph's work blends deep professional expertise with a coach's mindset and a communicator's heart. He has held leadership roles across public accounting, financial institutions, law firms, and technology organizations, bringing a rare combination of traditional accounting rigor and modern systems thinking to the people he serves. A graduate of the University of Delaware and Wilmington University (MBA), he is known for turning complex money topics into simple, repeatable frameworks that help people make wiser decisions and build lasting financial stability.
He is the host of Becoming Financially Confident, a live weekday show built on a single conviction: most money stress is not a character problem but a systems problem, and shame is what keeps people from fixing it. The show grew out of Financially Confident Christian, which Ralph hosted for more than 1,200 episodes across eight seasons and earned national recognition. The new show offers the same host and the same feed, opened up to a wider audience.
Through Ask Ralph Media, Ralph hosts several other programs. Grit and Growth Business… Read More
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