Most individuals have a portion of their pay withheld by their employer to be paid to the IRS. However, in certain situations, such as when you are self-employed and receive a 1099, this process happens a little differently. Estimated taxes are payments made quarterly to the IRS directly from an individual. This is to make sure that their tax liability is covered throughout the year. It is a pay-as-you-go sort of system, rather than a lump-sum, end-of-year method.

Estimated tax payments are not only for the self-employed, although this is the most typical scenario. If you have any source of income that does not have taxes withheld automatically, you should consider making estimated payments quarterly to avoid a potential underpayment penalty.

Ultimately the IRS wants their money. Your job as a taxpayer is to be sure that they get it, whether it be payroll-deducted by your company, or sent in quarterly yourself. Please consult your tax professional for any assistance.