Quarterly Estimated Taxes: A Simple Calendar and Formula to Help You Avoid Penalties

If you are self-employed, own a business, receive rental income, or earn money outside a regular paycheck, you may need to pay taxes throughout the year rather than waiting until you file your annual tax return.

These payments are called quarterly estimated taxes. They cover federal and state income taxes on income that is not subject to sufficient tax withholding.

For individuals and business owners, estimated tax planning is more than remembering four payment dates. The amount you need to pay depends on your income, deductions, withholding, prior-year tax liability, and applicable safe-harbor rules. Making small or late payments can result in underpayment penalties, even if you pay the full balance when filing your tax return.

At Velin & Associates, Inc., we help individuals, investors, self-employed professionals, and business owners calculate estimated tax obligations, evaluate federal and California safe-harbor requirements, and adjust payments as financial circumstances change.

1. Who Needs to Pay Quarterly Estimated Taxes?

Estimated tax payments are generally required when you receive income that is not subject to sufficient withholding and expect to owe additional tax when you file your return.

Common examples include:

• Self-employed individuals: Freelancers, independent contractors, consultants, and sole proprietors.
• Business owners: Individuals receiving income from partnerships, S corporations, and other pass-through businesses.
• Landlords: Property owners receiving rental income without tax withholding.
• Investors: Individuals receiving substantial interest, dividends, capital gains, or other investment income.
• Employees with additional income: Individuals who receive a regular paycheck but also earn consulting income, receive investment income, or have other sources of taxable income.

For federal income tax purposes, individuals generally need to make estimated payments if they expect to owe at least $1,000 after withholding and refundable credits, and their withholding and credits will be less than the smaller of:

• 90% of the tax expected on their current-year return; or
• 100% of the tax shown on their prior-year return.

For taxpayers whose prior-year adjusted gross income exceeded $150,000 ($75,000 for married individuals filing separately), the prior-year percentage generally increases to 110%.

California has separate requirements. Individuals generally must make estimated payments if they expect to owe at least $500 ($250 for married/RDP filing separately) after withholding and credits and do not meet the applicable payment requirements.

These are general rules, and exceptions may apply depending on the taxpayer’s circumstances.

2. Estimated Tax Payment Calendar: 2027

The next payment deadline is January 15, 2027, which covers the final estimated tax installment for the 2026 tax year.

After that, the 2027 estimated tax payment schedule begins in April.

Federal estimated tax payment dates

The January 18, 2028 deadline reflects the weekend and federal holiday adjustment: January 15 falls on a Saturday, and January 17 is Martin Luther King Jr. Day.

Although these payments are commonly called quarterly payments, the federal income periods are not all three months long. The second payment covers only April and May, while the last payment covers four months.

California estimated tax payment schedule

California follows a different installment schedule from the federal government. For individuals, the currently published 2026 schedule uses the following percentages:

For 2027 planning, taxpayers should confirm the installment percentages and instructions in the California Franchise Tax Board’s 2027 Form 540-ES when published. The federal and California schedules should not be assumed to be identical.

Important: A taxpayer may have a federal estimated tax payment due even when no California installment is required for the same period. Calculating both obligations separately is essential.

3. How to Calculate Estimated Tax Payments

The basic calculation starts with estimating your total tax liability for the year. You then account for the amount expected to be covered by paycheck withholding, refundable credits, and other applicable payments.

A simplified planning formula is:

Estimated annual tax – expected withholding and credits = remaining tax to cover

For federal purposes, the required annual payment is generally based on the smaller of:

• 90% of the tax expected for the current year; or
• 100% of the tax shown on the prior-year return.

For certain higher-income taxpayers, the prior-year percentage increases to 110%.

The applicable safe-harbor amount is then compared with withholding and other payments to determine the estimated tax installments needed.

Example: A self-employed consultant

Suppose a consultant expects the following for the year:

• Estimated federal income and self-employment tax: $24,000
• Expected federal withholding and refundable credits: $4,000
• Remaining amount to cover: $20,000

If the consultant’s applicable safe-harbor calculation supports a required annual payment of $20,000, the simplified federal installment amount would be:

$20,000 ÷ 4 = $5,000 per installment

This is a simplified example. The actual calculation may differ based on the taxpayer’s prior-year tax, income level, deductions, credits, withholding, and other tax items.

California requires a separate calculation. Its installment percentages and certain safe-harbor provisions differ from federal rules.

4. Understanding the Safe-Harbor Rules

One of the most important concepts in estimated tax planning is the safe harbor.

A safe harbor is a payment rule that can help taxpayers avoid an underpayment penalty even if their final tax liability is higher than expected.

For federal taxes, individuals generally meet the safe-harbor requirement by paying, through withholding and timely estimated payments, at least:

• 90% of their current-year tax; or
• 100% of their prior-year tax.

For taxpayers whose prior-year adjusted gross income exceeded $150,000 ($75,000 for married filing separately), the prior-year requirement generally increases to 110%.

This can be particularly useful for business owners whose income fluctuates. For example, if a business has a much more profitable year than the previous year, using the prior-year safe-harbor amount may help the owner avoid an underpayment penalty, provided all applicable requirements are satisfied.

However, safe harbor does not mean the taxpayer has paid the entire tax liability. It addresses the potential underpayment penalty. Any remaining balance is still due when the tax return is filed.

California safe-harbor rules

California has its own safe-harbor requirements.

Generally, the required annual payment is based on the smaller of 90% of current-year California tax or 100% of prior-year California tax.

For taxpayers whose prior-year California adjusted gross income exceeded $150,000 ($75,000 for married/RDP filing separately), the prior-year percentage generally increases to 110%.

California also has a special rule for very high-income taxpayers. If current-year California adjusted gross income is at least $1 million ($500,000 for married/RDP filing separately), estimated payments generally must be based on 90% of current-year tax.

These differences matter for business owners, investors, and individuals with substantial income. Meeting the federal safe harbor does not automatically satisfy California’s requirements.

5. What Happens If You Miss a Payment or Pay Too Little?

Missing an estimated tax deadline or paying less than the required installment can result in an underpayment penalty.

The IRS generally calculates the penalty based on the amount underpaid, how long the amount remained unpaid, and the applicable interest rate for the relevant period.

An important detail is that the penalty is calculated separately for each installment period. Paying the full balance before filing your annual return does not necessarily eliminate penalties from earlier underpayments.

California has its own underpayment penalty rules, which are calculated separately from the federal penalty.

Common reasons taxpayers receive estimated tax penalties include:

• Missing one or more payment deadlines.
• Dividing the annual tax obligation incorrectly.
• Forgetting to account for self-employment tax.
• Underestimating income from a business or investment.
• Failing to adjust payments after a significant increase in income.
• Assuming federal and California payment rules are identical.

In certain situations, taxpayers may qualify for an exception or reduce a penalty through an annualized income calculation. However, these options depend on the facts and applicable requirements.

6. What If Your Income Changes During the Year?

A fixed payment schedule may work when income is relatively consistent. However, many business owners and self-employed individuals do not earn the same amount every month.

For example:

• A consultant may receive most of their income during the second half of the year.
• A business owner may have an unusually profitable quarter because of a large contract.
• An investor may sell an asset and recognize a substantial capital gain.
• A partnership or S corporation owner may receive additional taxable income reported on a Schedule K-1.

In these situations, simply dividing the annual estimate into four equal payments may not accurately reflect when the income was earned.

The tax rules provide an annualized income installment method that may allow taxpayers to calculate required payments based on income earned during different parts of the year.

This method can be particularly useful when income is seasonal, irregular, or concentrated in certain months. It requires additional calculations and supporting records, but it may help reduce an underpayment penalty when income was earned later in the year.

At Velin & Associates, we review changes in income and determine whether estimated payments should be adjusted. This is especially important for business owners, investors, and individuals with multiple sources of income.

7. Why Professional Estimated Tax Planning Matters

Estimated tax payments are not simply four payments based on last year’s tax return. A reliable calculation requires an understanding of current income, expected deductions, credits, business activity, and the separate requirements imposed by federal and state tax authorities.

For example, an S corporation owner may receive wages subject to payroll withholding as well as pass-through income that is not subject to the same withholding. A partnership owner may receive taxable income reported on a Schedule K-1 without receiving a matching cash distribution. An investor may recognize a capital gain that significantly changes the estimated tax calculation.

These situations require more than a basic payment worksheet.

At Velin & Associates, Inc., we assist individuals, self-employed professionals, investors, and business owners with:

• Calculating federal and California estimated tax payments.
• Reviewing prior-year returns to determine applicable safe-harbor amounts.
• Estimating current-year income, deductions, and tax liabilities.
• Evaluating self-employment tax and pass-through business income.
• Adjusting estimated payments when income changes.
• Reviewing potential underpayment penalties and available exceptions.
• Coordinating estimated payments with broader tax planning strategies.

Our goal is to help clients manage their tax obligations throughout the year, reduce the risk of unexpected tax bills and penalties, and make informed financial decisions as their income changes.

Download the 2027 Estimated Tax Calendar and Payment Tracker

Keeping track of estimated tax deadlines is an important part of managing your finances. A missed payment or an incorrect installment can create unnecessary penalties and additional work when you file your return.

Download the Velin & Associates 2027 Estimated Tax Calendar and Payment Tracker to organize upcoming federal and California payment dates, record amounts paid, and keep track of your payment confirmations.

If your income has changed, you own a business, or you are unsure whether your estimated payments are sufficient, our office can review your tax situation and help determine the appropriate payment amounts.

Contact Velin & Associates, Inc. to arrange an estimated tax review and develop a payment plan based on your actual income and tax circumstances. For more information about our tax planning and tax compliance services, contact Velin & Associates, Inc. today.

Velin & Associates, Inc.

8159 Santa Monica Blvd STE 198/200
West Hollywood, CA 90046
📞 323-902-1000
📧 dmitriy@losangelescpa.org

This article is for general informational purposes only and does not constitute tax advice. Estimated tax requirements depend on individual circumstances, income, filing status, and applicable federal and state rules. A personalized calculation is recommended before making estimated tax payments. CPA for YouTubers | CPA for Shopify Store | CPA for Commerce | CPA for Creators | Shopify Store CPA | CPA for Filmmakers | CPA for Amazon Business | Amazon Business CPA | CPA for Dental Practice | Dentist CPA | Dental Business CPA | Online Commerce CPA | CPA for Doctors | CPA for Medical Practice | CPA for High Net Worth Individuals | Tax Services Healthcare | Tax Services for a Business | Tax Services TikTok | Tax Services for Commerce | Tax Services Los Angeles | Bookkeeping and Tax Services | Tax Preparation | Accounting Firm | Tax Services for Doctor | Tax Services for Entertainment | Online CPA | CPA Los Angeles