Payment 1 is the first estimated tax payment you make during the tax year

Payment 1 is the first of four quarterly estimated tax payments the IRS expects from you if you owe taxes that won't be withheld from a paycheck. It covers the first three months of the year (January through March) and is due on April 15. The IRS calls these payments "estimated tax" because you calculate what you think you'll owe for the whole year, divide by four, and send in each quarter's share.

You need to make Payment 1 if you're self-employed, have investment income, receive rental income, or have other income sources where no employer withholds taxes. If you're an employee and your withholding is correct, you don't make estimated payments — your employer handles it. But if you're underpaid on withholding or have side income, Payment 1 is how you catch up before the year ends.

The amount you send in Payment 1 should be one-quarter of your total expected tax liability for the year. If you guessed wrong, you adjust in later quarters or settle up when you file your return in April of the following year. The IRS charges interest and penalties if you significantly underpay, so Payment 1 is not optional if you owe — it's a required installment.

Key Takeaways

  • Payment 1 is due April 15 and covers tax on income earned January through March.
  • You must make Payment 1 if you expect to owe $1,000 or more in taxes that won't be withheld from paychecks.
  • The amount should be one-quarter of your estimated total tax for the year, calculated using Form 1040-ES.
  • You can pay by mail, online through IRS Direct Pay, or by credit card through an IRS-approved processor.
  • Missing Payment 1 triggers interest and penalties, even if you pay everything when you file your return in April of the next year.

Who must make Payment 1

You must make Payment 1 if you expect to owe at least $1,000 in federal income tax for the year after subtracting any withholding and tax credits. This threshold applies whether you're self-employed, have a side business, earn rental income, receive capital gains, or have other income sources. If you're an employee with a W-2 job and that's your only income, your employer's withholding usually covers your tax, so you don't make estimated payments.

The rule is about what you expect to owe, not what you owed last year. If your income changes — you start a business, sell an investment, or lose a job — your Payment 1 amount changes too. You calculate it fresh each year using Form 1040-ES, which walks you through the math and tells you what to send.

If you're married filing jointly, both spouses' income counts toward the $1,000 threshold. If you're married filing separately, each spouse has a separate $1,000 threshold. If you're a nonresident alien, the rules are stricter — you may owe estimated tax even on smaller amounts.

How to calculate Payment 1 using Form 1040-ES

Form 1040-ES is a worksheet, not a form you file with the IRS. It has four worksheets inside: one for income, one for tax, one for credits, and one for the quarterly payment amount. You fill it out once a year (usually in January or early April) to figure all four quarterly payments at once.

Start by estimating your total income for the year — wages, self-employment income, rental income, capital gains, interest, dividends, and any other sources. Subtract deductions (standard or itemized) and subtract tax credits you expect to claim. The result is your estimated tax for the year. Divide by four, and that's Payment 1. If you made a Payment 4 last year (in January of this year), you subtract that from your Payment 1 amount, because Payment 4 counts toward this year's tax.

The IRS also provides a safe harbor: if you pay 100% of last year's total tax (or 110% if your adjusted gross income was over $150,000), you won't face a penalty for underpayment, even if you owe more when you file. Many people use this shortcut in Payment 1 if their income is stable year to year.

Payment 1 due date and where to send it

Payment 1 is due April 15 each year. If April 15 falls on a weekend or holiday, the due date moves to the next business day. The IRS does not mail you a bill or reminder — you calculate and send it on your own schedule.

You can pay by mail, online, or by phone. The easiest method is IRS Direct Pay, which is free and lets you schedule a payment from your bank account up to 120 days in advance. You go to irs.gov, click "Payments", and follow the prompts. You'll need your Social Security number or employer ID number, your filing status, and your bank account details. The IRS confirms the payment when ready.

You can also pay by credit or debit card through an IRS-approved payment processor (such as PayPal, Stripe, or others listed on irs.gov). These processors charge a convenience fee — usually 1.5% to 2% of the payment — so you pay more than if you use Direct Pay. If you mail a check, write "2024 Form 1040-ES" (or the current year) on the check, include a payment voucher from Form 1040-ES, and send it to the address shown in the form instructions for your state.

What happens if you miss Payment 1

If you don't pay by April 15, the IRS charges interest on the unpaid amount starting April 16. The interest rate changes quarterly and is currently around 8% per year, but it varies. You also face an underpayment penalty, which is separate from interest. The penalty is calculated based on how much you underpaid and for how long.

You can't avoid the penalty by paying everything when you file your return in April of the next year. The IRS treats each quarterly payment as a separate obligation. If you miss Payment 1 but make Payments 2, 3, and 4 on time, you still owe a penalty on the Payment 1 shortfall. The penalty is usually small if you're only a few weeks late, but it adds up if you miss multiple quarters.

If you have a good reason for missing Payment 1 — a serious illness, natural disaster, or other casualty — you can ask the IRS to waive the penalty by filing Form 2210 with your tax return and explaining the situation. The IRS grants waivers rarely, but it's worth trying if your circumstances were truly extraordinary.

Adjusting Payment 1 if your income changes

You don't have to stick with the Payment 1 amount you calculated in January. If your income changes — you get a raise, lose a job, sell an investment, or have an unexpected expense — you can recalculate and adjust Payments 2, 3, and 4. You don't go back and change Payment 1, but you can make up the difference in later quarters.

For example, if you calculated Payment 1 as $2,000 based on expected self-employment income of $80,000, but by June you realize you'll only earn $60,000, you can reduce Payments 2, 3, and 4. Fill out Form 1040-ES again with your new estimate, calculate the new quarterly amount, and send that amount for the remaining quarters. When you file your return, the IRS will true up the difference.

If your income is very uneven — you earn most of it in one quarter — you can use the annualized installment method on Form 2210 to pay more in the quarters you earn more and less in the slow quarters. This method is more complex but can save you money if your income is lumpy.

Payment 1 and your tax return the following year

When you file your tax return in April of the following year, you report all four quarterly payments you made. Line 37 on Form 1040 asks for your total estimated tax payments for the year. The IRS matches this against what you actually owe and either sends you a refund or bills you for the difference.

If you overpaid — you sent in $8,000 in quarterly payments but only owed $7,500 — you get a $500 refund (or you can explore it to next year's estimated tax). If you underpaid — you sent in $7,000 but owed $8,000 — you owe $1,000 plus interest and possibly a penalty. The interest accrues from the original due date of each payment, so underpayment in Payment 1 costs more in interest than underpayment in Payment 4.

This is why Payment 1 matters even though you don't file your return until the following April. The IRS is tracking your quarterly payments throughout the year and charging interest if you're behind.

Frequently Asked Questions

Can I make Payment 1 early or late?

You can pay early without penalty — the IRS accepts payments anytime before the due date. If you pay late, interest and penalties start accruing on April 16. There is no grace period. If you can't pay the full amount by April 15, pay what you can and file Form 2210 with your return to explain the underpayment.

What if I'm self-employed and don't know my income yet in April?

Use your best estimate based on what you've earned so far and what you expect for the rest of the year. If you're very uncertain, use the safe harbor method: pay 100% of last year's total tax (or 110% if your income was over $150,000). This protects you from penalties even if you owe more when you file. You can adjust Payments 2, 3, and 4 once you have better information.

Do I need to file a separate form to make Payment 1?

No. You calculate the amount using Form 1040-ES, but you don't file it with the IRS. You just send the payment by the due date. Form 1040-ES is a worksheet for your records. You report all four quarterly payments on your tax return the following year on Form 1040.

What if I have both a W-2 job and self-employment income?

Your W-2 employer withholds tax on your wages. You calculate estimated tax on your self-employment income only and make quarterly payments on that. When you file your return, the IRS combines your withholding and estimated payments and compares the total to what you owe. If your withholding is too high, you may not need to make Payment 1 at all.

Can I pay Payment 1 from a business account or does it have to be personal?

You can pay from either account as long as the payment is in your name (or your business name if you're a sole proprietor). If you're a partnership or corporation, the payment must be in the business name and EIN. The payment method (Direct Pay, credit card, or check) doesn't care which account you draw from.