Do quarterly tax estimates have to all be the same?

[disneysteve]

How much are we talking about?

Very little as of right now. Potentially annual income below the standard deduction, though she will still owe self employment tax.

The hope is that income ramps up (or she gets another job) and later quarters are substantially different, but based on Q1 which is all she has data for right now, that's where she is.

 

[SevenUp]

Thank you!

So for your last paragraph, if she were going to earn $16,100, for her Q1 estimate, she would just pay 1/4 of the SE tax and that's it?

Yes - if her earnings for the year are in fact $16,100. If she earns enough more, then that strategy will incur an underpayment penalty for at least the first quarter, unless she uses Schedule AI....

 

[disneysteve]

Yes - if her earnings for the year are in fact $16,100. If she earns enough more, then that strategy will incur an underpayment penalty for at least the first quarter, unless she uses Schedule AI....

I'm not sure I understand this. If her anticipated 2026 income as of right now is $16,100 and she pays the SE tax due for her Q1 estimate, why would there be a penalty? Or do you just mean that when she does her 2026 taxes she needs to include schedule AI to avoid any penalty?

She didn't start the main job until the end of February so her Q1 income is particularly low but Q2 will be higher since she'll have worked for 3 months, not 1. She will certainly be able to document each quarter's income come tax time.

 

[pb4uski]

If she ends up subject to income taxes she would likely be in the 50% tier for the Retirement Saver's Tax Credit and could get a 50% tax credit for each $1 of Roth IRA contribution to eliminate her tax.

For example, if her self-employment income for the year was $20,000, then her SE tax would be $2,826 ((20,000*(1-(15.3%/2))*15.3%). The Taxable income would be $2,487 after the $16,100 standard deduction, resulting in $249 in income tax in the 10% tax bracket. But if she made a $498 Roth contribution by 4/15/2027 then she would get a $249 tax credit that would offset her tax so her income tax due would be $0.

If she takes that path then all she would need to do is to pay her self-employment tax each quarter (YTD self employment income * 15.3% less prior YTD SE tax payments) and not worry about estimated income tax knowing that she can offset it with tax credits next spring.

 

[audreyh1]

Thank you!

So for your last paragraph, if she were going to earn $16,100, for her Q1 estimate, she would just pay 1/4 of the SE tax and that's it?

The way the annualizing works, whatever she earned in Q1 gets multiplied by 4 to get an annualized AGI, and then you compute the tax on that. For Q1 estimated taxes payment you pay 22.5% that annualized tax including the SE tax.

 

[disneysteve]

The way the annualizing works, whatever she earned in Q1 gets multiplied by 4 to get an annualized AGI, and then you compute the tax on that. For Q1 estimated taxes payment you pay 22.5% that annualized tax including the SE tax.

Right, so with a hypothetical $16,100 income, she would have no tax due beyond the SE tax.

 

[Steelpony]

My daughter is now working 2 jobs that are 1099 positions so she has to file quarterly estimates. I have no experience dealing with that as I’ve never needed to do it for us.

She really can’t predict today how much she will make for the year. Do all 4 quarterly estimates need to be the same or can she adjust the amounts each quarter as her income picture becomes clearer?

Thanks for any advice on how to do this.

She just needs to withhold more then 2025 (or 90% of this years taxes if she can guess) for Fed and state taxes to avoid any penalties. Even or uneven amounts. If she or you uses an accountant ask him or her.

 

[SevenUp]

I'm not sure I understand this. If her anticipated 2026 income as of right now is $16,100 and she pays the SE tax due for her Q1 estimate, why would there be a penalty?

There could be if her actual 2026 income is enough higher than what she now anticipates.

Or do you just mean that when she does her 2026 taxes she needs to include schedule AI to avoid any penalty?

She might or might not need to include schedule AI to avoid any penalty. The likelihood of needing to include it increases to the extent her actual income exceeds her currently anticipated income.

She didn't start the main job until the end of February so her Q1 income is particularly low but Q2 will be higher since she'll have worked for 3 months, not 1. She will certainly be able to document each quarter's income come tax time.

Note that form 2210 uses an "unusual" definition of "quarter". Much, maybe all, of this will become clearer if she and/or you put pencil to a draft form 2210 (and read occurrences of 2025 as 2026, and 2024 as 2025).

You/she could then come back with specific questions about numbers on that form.

 

[cathy63]

Right, so with a hypothetical $16,100 income, she would have no tax due beyond the SE tax.

Yes, but this is a bit confusing because we started with "she really can't predict" and now we're at "less than the standard deduction".

For this year, even if she's sure she won't make much, I would highly recommend that she go ahead and figure the estimates each quarter using the IRS forms rather than just doing a divide-by-four approach. This is an excellent way to learn how the taxation of self-employment income works. It might take an hour or so the first time, but that will demonstrate where her business record keeping can be improved to make the next time easier. Then the final January calculation should get her very close to her actual tax return. Getting the record keeping process established and fine tuned in the first year will make everything much easier going forward, and if her business grows to the point where she engages a bookkeeper and/or tax preparer, being able to hand off information in a usable format will save her money.

After this year she could do the "prior year taxes divided by four" method to reach the safe harbor.

 

[frank05]

Run various scenarios through TT and see what happens. Even though it is the 2025 version it should be in the ballpark.

 

[audreyh1]

Right, so with a hypothetical $16,100 income, she would have no tax due beyond the SE tax.

She has to take what she actually earns in Q1 and multiply that by 4 to know the amount she has to calculate taxes on. Where did $16,100 come from?

 

[mrfeh]

It's really not that difficult to estimate the taxes due each quarter, IMO.

 

[SevenUp]

Where did $16,100 come from?

2026 standard deduction for a single filer under age 65 and not blind.

 

[big-papa]

I've been paying quarterly estimated taxes since I retired. Early on, I spent the time understanding how it works, and how it will work for the full tax year when I file using my tax software. Then I created a monthly tracking spreadsheet that tracks all taxable events in my life. I then use the "Case Study" spreadsheet from Mr. Money Moustache to calculate the annualized tax for each of the 4 periods as I go. It was some work to set up the spreadsheet but once I did it's pretty easy. Never had a penalty.

Will continue with this method until I'm done with Roth conversions and then will switch over to a safe harbor method, most likely.

 

[disneysteve]

Yes, but this is a bit confusing because we started with "she really can't predict" and now we're at "less than the standard deduction".

For this year, even if she's sure she won't make much, I would highly recommend that she go ahead and figure the estimates each quarter using the IRS forms rather than just doing a divide-by-four approach. This is an excellent way to learn how the taxation of self-employment income works. It might take an hour or so the first time, but that will demonstrate where her business record keeping can be improved to make the next time easier. Then the final January calculation should get her very close to her actual tax return. Getting the record keeping process established and fine tuned in the first year will make everything much easier going forward, and if her business grows to the point where she engages a bookkeeper and/or tax preparer, being able to hand off information in a usable format will save her money.

After this year she could do the "prior year taxes divided by four" method to reach the safe harbor.

She can't predict because of the nature of her income. As of right now, based solely on her Q1 income, she would be under the standard deduction. She expects that to change over the course of the year but needs to know how to file her Q1 estimate given that current projection.

 

[audreyh1]

2026 standard deduction for a single filer under age 65 and not blind.

Thanks. In this case I don’t think it makes sense to use some hypothetical annual income but instead look at how annualized estimated tax payments work which depend entirely on the YTD income earned at the end of each tax period. Multiply that by an annualizing amount (4, 2.4, 1.5 and 1) to determine the annualized AGI. Compute the taxes owed on that amount, then including previous estimated taxes have paid a total of 22.5%, 45%, 67%, and 90% of the taxes owed on the annualized AGI. The math works differently then guessing at a hypothetical annual amount.

 

[Texas Proud]

I agree, estimating taxes is not rocket science... you just have to be close enough...

But, is there anyplace where she can have taxes deducted? If so, then have them take out a lot more than needed for that income so she does not have to pay quarterly...

 

[disneysteve]

I agree, estimating taxes is not rocket science... you just have to be close enough...

But, is there anyplace where she can have taxes deducted? If so, then have them take out a lot more than needed for that income so she does not have to pay quarterly...

Nope. Only 1099 income currently.

 

[rk911]

My daughter is now working 2 jobs that are 1099 positions so she has to file quarterly estimates. I have no experience dealing with that as I’ve never needed to do it for us.

She really can’t predict today how much she will make for the year. Do all 4 quarterly estimates need to be the same or can she adjust the amounts each quarter as her income picture becomes clearer?

Thanks for any advice on how to do this.

Nope

 

[rk911]

I agree, estimating taxes is not rocket science... you just have to be close enough...

But, is there anyplace where she can have taxes deducted? If so, then have them take out a lot more than needed for that income so she does not have to pay quarterly...

She can have ber employer take out X% or X$ additional every pay period.

 

[TheWizard]

She can have ber employer take out X% or X$ additional every pay period.

There is no "employer"...

 

[audreyh1]

I guess some folks don’t understand that she is self-employed.

 

[marinauser]

Seems pretty simple to me given that the quarterly payments do not have to be equal. Simply take what she makes during the first three months and multilply by 4. Calculate the taxes due on that for the year and pay one quarter of that amount plus say $100 for a minor cushion. The end of May do it again based on her 5 months earnings, the same again in September based on 8 months earnings. At the end of the year do it one more time. I you end up paying significantly more in December because her income grew significantly at the end of the year, you simply file the form (2210 if i remember correctly) to explain the lumpiness of her earnings and you won't owe a penalty even if on the surface it might appear that one is due. I do it this way pretty much every year.

 

[old medic]

Much easier to pay last year total tax due divided by 4 , costs a lot less than the penalty and annoying forms to fill out.

So if I subtract what has been withheld so far , and add a quarterly payment to meet 1/4 of 110% of last years tax I should be good?

 

[audreyh1]

So if I subtract what has been withheld so far , and add a quarterly payment to meet 1/4 of 110% of last years tax I should be good?

Yes.