Form 1040-ES is the IRS worksheet and payment voucher individuals use to pay estimated tax on income that has no withholding, such as self-employment or contractor income. Payments are due four times a year.
| Installment | Due date | Covers income from |
|---|---|---|
| 1st | April 15 | January to March |
| 2nd | June 15 | April and May |
| 3rd | September 15 | June to August |
| 4th | January 15 of the next year | September to December |
When a due date falls on a weekend or legal holiday, it generally moves to the next business day. Employees can often avoid estimated payments by increasing withholding on their Form W-4.
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A house cleaner worked as an employee last year, with tax withheld. Her total tax for last year was $4,000, and her adjusted gross income was well under $150,000. This year she works as an independent contractor with no withholding.
To be safe from the underpayment penalty, she can pay 100% of last year’s tax, $4,000, in four equal installments of $1,000 on April 15, June 15, September 15 and January 15, even if she earns more this year. Any extra tax is paid when she files her return.
If she had stayed an employee for part of the year, the tax withheld from those paychecks would count toward the same total. For the business that hires her, the important point is the classification: if she works like an employee, she should be paid as one, with withholding.
Employers do not file Form 1040-ES, but workers often ask about it, especially those moving between employee and contractor work. A short explanation helps: as an employee, income tax and the employee share of Social Security and Medicare are withheld from each paycheck; as a contractor, nothing is withheld, and the worker pays income tax and self-employment tax through estimated payments.
For employees with a second income, the simplest option is often extra withholding on their W-4 at their main job. Point them to the IRS tools or a tax professional rather than giving personal tax advice.
A warehouse employee also runs a weekend photography business that earns about $8,000 a year. She asks HR whether she needs to make estimated payments.
HR explains that it cannot give tax advice, but that the W-4 has a line for extra withholding, which some people use instead of estimated payments, and points her to the IRS estimator. She increases her withholding by a fixed amount each paycheck after checking with a tax preparer.
Individuals who expect to owe tax that withholding will not cover, such as independent contractors, freelancers and business owners.
April 15, June 15, September 15 and January 15 of the following year, or the next business day if a date falls on a weekend or holiday.
To avoid a penalty, generally the lesser of 90% of this year’s tax or 100% of last year’s tax (110% if last year’s AGI was over $150,000).
No underpayment penalty applies if the tax on your return, reduced by withholding, is less than $1,000.
Sometimes, if they have significant income without withholding, such as a side business. Extra W-4 withholding at their job can be an alternative.
No. Contractors get the form themselves from the IRS. Employers report contractor payments on Form 1099 where required.
EZTime turns clock-ins and approved corrections into signed monthly reports you can export to PDF or Excel for payroll.