Form 1040-ES, Estimated Tax for Individuals, is a US federal tax form. It is used to calculate and pay estimated tax each quarter on certain income that is not subject to withholding.
- freelance or self-employment earnings
- alimony payments
- profit from selling a business
- winning a prize
- the taxable portion of unemployment compensation
- the taxable portion of retirement benefits.
Form 1040-ES is especially relevant if you’re self-employed, a small business owner, or a gig worker.
When an employee receives a salary, their employer withholds income tax from each of their paychecks. But if you’re self-employed—or receive other forms of non-salaried income—tax isn’t deducted at the source. Instead, you may need to pay estimated tax at four regular intervals throughout the year.
Who Files Form 1040-ES?
Included below are examples of when you must complete Form 1040-ES.
- If you have received income not subject to withholding
- If you expect your tax liability this year—not including your withholding and refundable credits—to be at least $1,000
- If you expect your withholding and refundable credits to be less than whichever is smaller:
- 90% of the amount of tax you anticipate owing this year or
- 100% of last year’s tax liability—if it covered the full 12 months.
How To Calculate Estimated Tax
There are two ways to calculate your estimated tax payments.
Firstly, you can pay 100% of what you paid in tax last year (or 110% for income over $150,000). This is called the “safe harbor rule.”
Alternatively, you can estimate your tax liability. Your estimate must be within 90% of your actual tax liability, which is calculated at the end of the year based on your real income.
Form 1040-ES includes a worksheet to help you with these calculations.
You can choose to pay whichever is the lesser of these two amounts. If you pay on time following one of these two rules, you won’t have to pay a penalty at the end of the tax year—even if you end up owing more tax than you’ve paid.
If you don’t pay estimated tax at regular intervals or underpay them, you may be required to pay penalties as well as interest on any amount owed. If you overpaid tax, you will receive a refund from the Internal Revenue Service (IRS).
How to pay estimated tax
You can pay estimated tax to the IRS by mail, over the phone, online, or using the IRS’s mobile app.
When To File Form 1040-ES
Estimated tax is due four times a year.
- April 15—for income received from January to March of the current year
- June 15—for income received from April to May of the current year
- September 15—for income received from June to August of the current year
- January 15 the following year—for income received from September to December of the current year
Your estimated tax payment is due the next business day if these dates fall on a weekend or public holiday.
If you’ve received income from self-employment or any other income not subject to withholding, then you may need to complete Form 1040-ES to calculate and pay your estimated tax. Estimated tax payments are due quarterly. If you fail to file Form 1040-ES and make the necessary payments, you may have to pay penalties and interest.
The rules around taxation are complex and constantly changing. This article is intended to provide general information only—you should seek advice from a qualified tax advisor about preparing your Form 1040-ES.
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