Estimated Taxes Aren't Just for the Self-Employed: What Preparers Should Tell Clients

Many clients think estimated taxes only apply to people who are self-employed. In Tax Tip 2026-69 (Sept. 14, 2026), the IRS reminds taxpayers that other people may need to make these payments too. If you prepare returns for clients with investments, rental property or other income outside a paycheck, this is worth a conversation.

Federal income tax is pay-as-you-go

Federal income tax must be paid as income is earned or received during the year. There are two ways to pay it: withholding or estimated tax.

Taxpayers who receive income from sources not subject to withholding, or who don't have enough withheld, may have to make estimated tax payments. The IRS says the next estimated tax payment due date is Sept. 15.

Who may need to pay estimated tax

Self-employed individuals typically pay their tax this way. But a taxpayer who is not self-employed may still have to pay estimated tax if they receive income from sources such as:

Interest
Dividends
Alimony
Capital gains
Royalties
Rents
Prizes and awards

Generally, individuals must make estimated tax payments if they expect to owe tax of $1,000 or more when their return is filed. The IRS specifically includes sole proprietors, partners and S corporation shareholders in this group.

Estimated tax is not only for income tax. It is also used to pay other taxes, such as self-employment tax and alternative minimum tax.

Ways to pay

The IRS lists several options for individuals:

Pay online.
Use Form 1040-ES and pay by mail.
Pay by phone.
Pay through the IRS Individual Online Account, where taxpayers can also see their payment history and other tax records.

Businesses can now make most common business tax payments, including estimated taxes and federal tax deposits, through their business tax account or Direct Pay for businesses.

Most taxpayers who make estimated tax payments pay quarterly. Payments can also be made weekly, bi-weekly, monthly and so on, as long as the taxpayer has paid enough by the end of the quarter. The IRS points to IRS.gov/payments for all the options and to Publication 505, Tax Withholding and Estimated Tax, for more detail.

Avoiding penalties

A taxpayer who didn't pay enough tax during the year, either through withholding or estimated tax payments, may have to pay a penalty. Generally, the IRS can figure this penalty for the taxpayer. The IRS puts it simply: knowing the requirements and paying on time is key to avoiding penalties.

What to tell your clients

Estimated tax is not limited to the self-employed. Ask every client whether they receive income that has no withholding, such as interest, dividends, rents, royalties, capital gains, alimony, or prizes and awards.
Ask whether the withholding they have is enough to cover their tax for the year.
If a client expects to owe $1,000 or more when the return is filed, they generally need to make estimated tax payments.
Remind clients that estimated payments also cover self-employment tax and alternative minimum tax, not just income tax.
Show them the payment options, including Form 1040-ES, online and phone payments, and the Individual Online Account for payment history.
Business clients can use their business tax account or Direct Pay for businesses for estimated taxes and federal tax deposits.
Explain that paying too little during the year can lead to a penalty, and that paying on time is how to avoid it.

This article summarizes IRS Tax Tip 2026-69. For the full rules, see Publication 505, Tax Withholding and Estimated Tax, and the Estimated taxes page on IRS.gov.

Informational only, based on the IRS source linked above; not tax or legal advice for a specific situation.