Employees usually have tax withheld from pay. Independent workers often need to make payments during the year because no employer is withholding enough for them. The U.S. and Canadian systems use different rules, but both require realistic income estimates and clean records.
Start with a current profit estimate
- Reconcile year-to-date business income.
- Separate business expenses from personal spending.
- Update expected income and expenses for the rest of the year.
- Include other household income, withholding, credits, and prior payments.
U.S. estimated tax
Estimated tax can cover income tax and self-employment tax. The IRS states that individuals including sole proprietors, partners, and S corporation shareholders generally may need estimated payments when they expect to owe at least the applicable amount when filing. Use current Form 1040-ES and Publication 505 for the calculation and exceptions.
Canadian tax instalments
The CRA may require instalments when tax is not sufficiently withheld, including for self-employment, rental, investment, pension, or multiple-job income. The CRA provides no-calculation, prior-year, and current-year options in its instalment guidance. Province and prior-year net tax owing can affect the requirement.
Avoid a set-it-and-forget-it estimate
- Review the estimate after a major client gain or loss.
- Recalculate after a large equipment purchase or business change.
- Keep confirmation numbers for every payment.
- Use the correct tax year and account when paying.
- Coordinate wage withholding with business estimates when you also have a job.
Frequently asked questions
Are estimated taxes always paid quarterly?+
Payment schedules and exceptions depend on the country and taxpayer. Use the current IRS or CRA guidance for your required dates and amounts.
Can I increase W-4 withholding instead of making U.S. estimated payments?+
In some cases, employees can request additional wage withholding. The IRS estimated-tax guidance and withholding estimator can help compare options.
Official sources
Use the government pages below to verify current instructions and requirements.
IRS: Estimated taxes ↗CRA: Required tax instalments ↗Bring the notice, return, or records to a focused consultation.
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