Learn who must pay estimated taxes, when to pay, and how to avoid IRS penalties with expert guidance from ACP Tax Advisory.
What Is Estimated Tax?
Estimated tax is a system used by the IRS that requires certain taxpayers to pay income taxes quarterly instead of once per year. It applies to federal income tax, self-employment tax, and other related obligations.
If you expect to owe taxes on income not subject to withholding — such as from freelance work, business income, rental income, or investments — you may be required to estimate and pay those taxes throughout the year.
Who Is Required to Pay Estimated Tax?
You’re generally required to make estimated payments if:
- You’re self-employed, a sole proprietor, a partner, or an S corporation shareholder, and
- You expect to owe $1,000 or more in tax after subtracting withholding and credits
C corporations must make estimated payments if they expect to owe $500 or more in federal tax during the year.
Who Is Exempt from Estimated Tax?
You are not required to make estimated tax payments if all of the following are true:
- You had no tax liability for the previous year
- You were a U.S. citizen or resident for the full year
- Your prior tax year covered a full 12-month period
- Your total tax owed last year was $0 or you operated at a net loss
Example: If your business ended 2024 with a loss, you are generally exempt from estimated tax in 2025. But if 2025 ends with profit, 2026 estimated payments will be required.
2025 IRS Estimated Tax Due Dates
Estimated tax payments are made in four installments. For 2025, these are the IRS deadlines:
| Income Period | Payment Due Date |
| January 1 – March 31 | April 15, 2025 |
| April 1 – May 31 | June 17, 2025 |
| June 1 – August 31 | September 16, 2025 |
| September 1 – December 31 | January 15, 2026 |
Tip: Set reminders at the start of the fiscal year to stay ahead of these critical dates.
IRS Penalties: What Happens If You Don’t Pay?
Failing to pay estimated taxes properly can result in penalties for:
- Underpayment (not paying enough throughout the year)
- Late payment (missing one or more due dates)
- Overpayment (can delay refunds and hurt cash flow)
At ACP Tax Advisory, we help business owners avoid these penalties through accurate projections and timely planning.
W-2 Employees: Can You Avoid Estimated Payments?
Yes — if you receive wages, you can increase your federal withholding to cover your tax obligation.
To do this, file a revised Form W-4 with your employer, specifying an additional amount to withhold each pay period. This can help you avoid making quarterly payments.
State-Level Estimated Tax Payments
This article covers federal tax requirements only. If you live in a state that charges state income tax, you may also need to make state-level estimated payments.
ACP Tax Advisory can guide you through both federal and state estimated tax obligations to ensure full compliance.
Summary: Who Needs to Pay Estimated Tax in 2025?
| You must pay if… | You may be exempt if… |
| You’re self-employed or a small business owner | You owed $0 tax last year and had no income |
| You expect to owe $1,000+ in federal tax | You’re a full-year U.S. resident with no liability |
| You’re a C corp expecting $500+ in tax | Your prior year business operated at a loss |
Need Help With Estimated Taxes?
At ACP Tax Advisory, we make quarterly tax planning simple and stress-free. Whether you’re just getting started or need to catch up on late payments, our experts will help you estimate your tax liability, avoid penalties, and stay compliant with the IRS.
Schedule a free consultation today and take control of your tax strategy.
