Estimated tax payment
Also: estimated tax payment, estimated taxes, quarterly tax payment, Q1/Q2/Q3/Q4 payment
A voluntary federal or state tax payment made quarterly to cover tax liability not already withheld through payroll. Required when withholding is insufficient to meet safe harbor thresholds.
Estimated tax payments cover tax liability that withholding does not. The federal deadlines are April 15, June 15, September 15, and January 15 of the following year. Tech employees with large RSU vests, NSO exercises, or tender sales often need to make estimated payments to avoid underpayment penalties, because the 22% supplemental withholding rarely matches the filer’s actual bracket. Federal estimated payments are made through IRS Direct Pay or Form 1040-ES. Most states have parallel systems.
Example: a senior engineer vests $800,000 of RSUs in March at 22% federal withholding. Her marginal bracket is 32%. The $80,000 gap needs to be paid via an April 15 estimated payment to avoid underpayment penalties for the first quarter. She pays $80,000 to the IRS on April 15 and $5,000 to California for the state gap.
Common mistake: batching the entire year’s gap into a single January 15 payment. The IRS applies a quarterly safe harbor test: underpayment in Q1 generates penalties even if Q4 is overpaid. Spread the payment across quarters or match it to the quarter of income.
Estimated tax payments matter every year, at every large equity event, and for married couples with irregular RSU vesting calendars.