The IRS issued a reminder this week: estimated tax payments aren’t just a self-employment issue. If you receive income that isn’t subject to withholding and you expect to owe at least $1,000 when you file, you likely need to be making quarterly payments. The next deadline is September 15, 2026.
Why this matters beyond freelancers
Federal income tax works on a pay-as-you-go basis. Most employees handle this automatically through payroll withholding. But a lot of income falls outside that system. The IRS specifically calls out these sources as potentially triggering an estimated tax obligation:
- Interest and dividends
- Capital gains
- Rental income
- Royalties
- Alimony
- Prizes and awards
The $1,000 threshold applies broadly. It’s not limited to sole proprietors or freelancers. Partners, S corporation shareholders, and individuals with investment or passive income all fall under the same general rule. And estimated payments cover more than just income tax: they’re also how you prepay self-employment tax and, where applicable, the alternative minimum tax.
What to watch for if you’re not self-employed
The most common scenario where this catches people off guard: a salaried employee who also has a brokerage account, a rental property, or a side interest income stream. Their W-2 withholding covers their salary, but nothing automatically covers the rest. If those other sources push their total owed tax above $1,000, they need to make estimated payments or risk an underpayment penalty.
The same applies to gaming and entertainment businesses that generate irregular revenue streams, passive royalties, or licensing income. Even when the business itself withholds for employees, the owners’ pass-through income doesn’t get withheld at source.
How to pay
The IRS offers several payment options. Most taxpayers pay on a quarterly schedule, but you can also pay weekly, bi-weekly, or monthly as long as you’ve paid enough in by the end of each quarter.
- Online: Pay through IRS.gov/payments or your IRS Individual Online Account
- By mail: Use Form 1040-ES
- By phone: Call the IRS payment line
- Business accounts: Use the IRS Business Tax Account or Direct Pay for businesses for estimated taxes and federal tax deposits
The penalty risk
Missing or underpaying estimated taxes can result in a penalty, even if you pay the full balance when you file. The IRS will generally calculate this penalty for you, but that doesn’t mean it’s avoidable after the fact. Staying current through the year is the only way to avoid it.
What BCA can help with
Estimated tax planning is part of BCA’s core advisory work. Whether you’re an owner-operator with pass-through income, an investor with capital gains, or a business with variable quarterly cash flow, getting your estimated payments right throughout the year avoids surprises at filing time. If you’re not sure whether your current withholding is covering what you owe, a mid-year review with a tax advisor is worth the time before the September 15 deadline.
This article is for educational purposes only and does not constitute tax, legal, or financial advice. Tax rules are subject to change. Consult a qualified tax advisor for guidance specific to your situation.
Educational information only, not licensed legal, tax, or financial advice. We refer to and partner with licensed professionals when personalized advice is needed. Laws change; no warranty of accuracy or timeliness.
Sources
IRS Tax Tip 2026-69, “Estimated taxes aren’t just for the self-employed,” September 14, 2026: https://content.govdelivery.com/accounts/USIRS/bulletins/42a8ef2