Executive Summary
When do I need to make estimated tax payments for equity compensation?
You need estimated payments when your withholding (from salary, RSU vesting, etc.) won't cover your tax. This happens often with RSUs (22% withholding may be too low) and ISO exercises (no withholding on AMT). Pay quarterly: April 15, June 15, September 15, January 15. To avoid penalties, pay at least 90% of your current-year tax or 110% of prior-year tax.
Your RSUs just vested. Your employer withheld 22%. You're in the 32% bracket. That's a shortfall—and the IRS expects you to pay as you go. If you don't, you'll owe more at tax time and possibly face penalties.
The bottom line: Estimated tax payments let you pay the IRS during the year instead of in one lump at filing. For equity compensation, they're often necessary. The deadlines are quarterly. Missing them can mean penalties. See our withholding guide for why the shortfall happens.
When You Need Estimated Payments
| Situation | Why |
|---|---|
| RSU vesting | 22% withholding may be less than your bracket |
| NSO exercise | Withholding may be insufficient |
| ISO exercise | No withholding on AMT—you must pay |
| Stock sales | Capital gains have no withholding |
| Side income | Freelance, consulting, etc. |
The Deadlines
| Quarter | Due Date | Covers |
|---|---|---|
| Q1 | April 15 | Jan 1 – Mar 31 |
| Q2 | June 15 | Apr 1 – May 31 |
| Q3 | September 15 | Jun 1 – Aug 31 |
| Q4 | January 15 (next year) | Sep 1 – Dec 31 |
If the 15th falls on a weekend or holiday, the next business day applies.
How Much to Pay
Safe Harbor Rule
To avoid underpayment penalties, pay at least:
| If your prior-year AGI was... | Pay this amount |
|---|---|
| Under $150,000 | 100% of prior-year tax |
| $150,000 or more | 110% of prior-year tax |
Or pay 90% of your current-year tax. Whichever is smaller.
Example: Your 2024 tax was $50,000. To be safe for 2025, pay at least $50,000 (or $55,000 if AGI was $150K+) through withholding + estimated payments. If you pay that much, you can owe at filing without penalty.
How to Pay
- IRS.gov — Direct Pay or EFTPS
- Form 1040-ES — Voucher with check (if mailing)
- Tax software — Many programs include estimated tax payment options
You'll need to calculate the amount due each quarter. The IRS has a worksheet in Form 1040-ES. Or use the Tax Withholding Estimator on IRS.gov.
Timing Strategies
| Strategy | When to Use |
|---|---|
| Pay after the event | Make a payment in the quarter when RSUs vest or you exercise |
| Spread over quarters | If you expect a big year, spread payments evenly |
| Prior-year safe harbor | If last year was similar, pay 110% of prior-year tax—simple and predictable |
Frequently Asked Questions
What if I miss a deadline?
Pay as soon as you can. The penalty is based on how much you underpaid and for how long. Catching up later reduces the penalty. Don't skip—pay something.
Can I increase withholding instead of estimated payments?
Yes. If you have a job, you can increase W-4 withholding to cover the shortfall. That avoids the need for separate estimated payments. See our Form W-4 guide for how.
Do I need to make equal payments each quarter?
Not necessarily. You can pay more in quarters when you have big equity events. But the IRS expects you to pay as income is earned. If you have a huge vesting in Q4 and pay nothing until then, you might owe a penalty for Q1–Q3. The rules are complex—when in doubt, pay earlier.
Disclaimer: This guide is for educational purposes. It does not constitute tax advice.
Last Updated: March 2026 | Research Team: VestingStrategy