Form 1040-ES: How Estimated Tax Payments Work

When you work for an employer, tax is taken out of each paycheck. If you are self-employed, or have income that no one withholds from, you generally pay the IRS yourself during the year. Form 1040-ES is how you work out and make those estimated payments.

Who usually needs it

• Freelancers, contractors and other self-employed people.
• People with significant interest, dividend, rental or capital gains income.
• Anyone whose withholding will not cover their tax bill for the year.
• Not usually needed if your withholding covers what you expect to owe. The instructions explain the thresholds.

How it works

The tax year is split into payment periods. Estimated tax is generally paid in four installments, due in April, June, September and the following January, though the dates move if they fall on a weekend or holiday. You estimate your income, deductions and credits for the year, work out the tax, and divide it into payments using the worksheet in the form.

What is in the form

• A worksheet to estimate your tax for the year.
• Payment vouchers, one for each installment, to send with a check. You can also pay online or by other methods the IRS lists.
• Instructions explaining who must pay and how to avoid a penalty.

Paying too little

If you do not pay enough through the year, you may owe a penalty for underpayment. Form 2210 is used to figure it out. There are rules, sometimes called safe harbors, that can protect you if you paid a set share of the previous year's tax or of this year's tax. The current rules are in the instructions.

Self-employment tax

If you are self-employed, your estimate should include both income tax and self-employment tax, which funds Social Security and Medicare. Schedule SE shows how that is calculated on your return.

Common mistakes

• Waiting until the end of the year to pay.
• Forgetting self-employment tax in the estimate.
• Missing the January payment because it falls after the year ends.
• Not changing the estimate when your income changes a lot.

Fill it in without uploading it

Form 1040-ES opens in DocZap with its fields ready to type into, and what you enter stays in your browser, so nothing is uploaded. Fill in the worksheet first, then the vouchers. Download your copy when you are done.