What are quarterly tax payments — and do you need to pay?

If you're a freelancer, a small business owner, or anyone else who earns non-wage income, then tax time likely comes more than once a year. That's because the IRS requires you to make estimated tax payments every three months on any qualifying income that wasn't subject to federal withholding. Even if you earn all your taxable income through wages, you still might have to make quarterly payments under certain circumstances.

Failure to pay these taxes can hit you with a hefty penalty, so read on to understand who makes these payments and how they work.

The IRS requires you to pay taxes throughout the year as you receive income. If you earn a wage and get a W-2, then your employer is doing this on your behalf every time they withhold money from your paycheck. But if you receive other types of taxable income separate from your W-2, then you're responsible for making quarterly, estimated payments.

According to the IRS, you may have to make estimated tax payments if you receive any of the following types of income:

• interest
• dividends
• alimony
• capital gains (from sales of stocks or other assets)
• prizes and awards
• self-employment income

Speaking of self-employment income, if you work for yourself and expect to owe $1,000 or more in taxes, you likely need to pay estimated taxes regularly. These cover not only income tax but also the self-employment tax and alternative minimum tax.

Even if none of the above applies to you, you can still be subject to estimated taxes. For example, if you owe $1,000 or more in federal income taxes (after accounting for withholding and refundable credits) then you need to pay quarterly taxes.

You also need to pay estimated taxes if your withholding and refundable credits cover less than 90% of your tax liability for the current tax year, or 100% of your liability for the previous year (110% for higher-income taxpayers) — whichever is smaller.

Quarterly tax payments are due every 3 months. As the IRS explains, a year has four payment periods with the following quarterly payment due dates: April 15, June 15, Sept. 15 and Jan. 15. If a date falls on a weekend or holiday, the deadline is the next business day.

In 2024, the due dates are:

• Jan. 16, for the income earned from Sept. 1 to Dec. 31, 2023
• April 15, 2024, for the income earned from Jan. 1 to March 31, 2024
• June 17, 2024, for the income earned from April 1 to May 31, 2024
• Sept 16, 2024, for the income earned from June 1 to Aug. 31, 2024

You have a couple of options when it comes to figuring out your quarterly payments.

If your income is consistent, you can estimate how much you'll make and owe in taxes for the year — and send one-fourth of that to the IRS each quarter. Look at your taxes from last year to see how much taxable income you earned, and use that as a starting point when estimating your quarterly payments.

If your income varies, you can estimate your tax bill at the end of each quarter based on how much you have made that quarter. In this scenario, your payment amounts will be unequal throughout the year.

Form 1040-ES offers detailed instructions and can help you figure out the calculations for your payments.

There are a few ways you can pay your estimated taxes, including:

• Sending estimated tax payments by mail with Form 1040-ES
• Paying online on the IRS website
• Using IRS2Go, the official mobile app for the IRS
• Using the Electronic Federal Tax Payment System (EFTPS)— where you can also make all of your federal tax payments, such as installment agreement payments and federal tax deposits

If you use EFTPS, you can also access your payment history, which makes it easy to track the estimated tax payments you've already made. Alternatively, you can check your tax records kept in your IRS online account. Keep records of the estimated tax payments you make since you'll need to report them when filing your personal tax return. The total amount will go into line 26 on Form 1040.

Dealing with your quarterly payments by yourself might seem overwhelming. If that's the case, tax software can walk you through the process. TurboTax's Premium plan, for example, can help self-employed filers search for industry-specific deductions and correctly fill out the right information. And if you need help from a tax expert, you can upgrade to the Live Assisted option and get unlimited tax advice.

Certain software can also help you stay on top of your quarterly payments. For instance, if you opt for the Self-Employed tier with TaxSlayer, you can get tax payment reminders and print vouchers to easily keep track of your payments.

If you don't pay your estimated taxes on time (or if you don't pay enough), the IRS can charge you a penalty. The amount you owe increases the longer you go without payment. The failure to pay penalty is 0.5% of the unpaid taxes for each month or part of a month you don't pay, up to 25% of your unpaid taxes. Even worse, the IRS charges interest on penalties, which increases how much you owe. These interest rates are set quarterly.

If you rely on self-employed or other income that requires estimated payments, penalties can balloon quickly. For that reason, it's best to stay on top of your quarterly tax obligations. Consider working with a tax professional if you struggle to figure out how much you owe or have other questions.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every tax guide is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of tax software products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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