Who needs to pay quarterly, how to think about the amount, and how to avoid an underpayment penalty.
Published July 2026 · General information, not personalized tax advice — see note below.
If you're self-employed, run a business as a sole proprietor, partner, or S-corp shareholder, or otherwise receive income with little or no tax withheld from it, the IRS generally expects you to pay tax on that income as you earn it — not all at once the following April. That's what estimated tax payments are for. If you also have a day job with W-2 withholding, you may be able to cover some or all of your estimated liability by increasing your withholding there instead of sending quarterly checks — worth discussing with us if that's your situation.
The IRS doesn't require you to predict your income perfectly. Underpayment penalties generally don't apply if you pay in enough during the year to meet a "safe harbor" — historically based on a percentage of your current year's tax or a percentage of what you owed the prior year, whichever protects you better. The exact percentages and thresholds are set by the IRS and can shift, so rather than quote a number here that might be out of date by the time you read it, we calculate this precisely for each client based on current rules and your actual numbers.
The IRS spreads estimated payments across four due dates during the year, roughly in mid-April, mid-June, mid-September, and mid-January of the following year — shifted to the next business day if one falls on a weekend or holiday. Maryland has its own parallel state estimated payment schedule. We track both for our clients; you can also confirm current-year exact dates at IRS.gov or on our tax calendar.
The honest answer is: it depends on your actual year-to-date income, expenses, deductions, and any major changes (a new contract, a slow quarter, a large purchase). Guessing too low risks a penalty; guessing too high just means overpaying the government interest-free until you file. We recompute this with clients each quarter rather than setting a number in January and forgetting about it — income rarely stays flat all year.
Underpayment triggers a penalty calculated on the shortfall for the period it was outstanding, at a rate the IRS sets and adjusts periodically. It's rarely catastrophic, but it's an avoidable cost — and consistently underpaying can also complicate cash flow planning if a bigger bill lands unexpectedly at filing time.
If you've never made an estimated payment and think you might need to, or you have been making them but aren't confident the amount is right, that's exactly the kind of thing worth a short conversation before the next due date — not after.
A note on this article: this is general information for Maryland small businesses, not tax, legal, or accounting advice for your specific situation. Rules, rates, and thresholds referenced above are set by the IRS and the State of Maryland and can change from year to year — always confirm current figures at IRS.gov or marylandtaxes.gov, or talk with our team about your situation before acting on it.