Why quarterly estimated taxes don’t use normal quarters
If you’re an eCommerce seller, are self-employed or have income not subject to regular tax withholding (like investment earnings), you likely need to pay estimated taxes to the US federal government throughout the year. These payments are often called “quarterly,” but if you look at the due dates, you’ll notice they don’t neatly align with three-month calendar quarters. So, what’s the deal?
Why the “Quarterly” Deadlines are a bit strange
The US tax system works on a “pay-as-you-go” principle. This means you’re supposed to pay taxes on your income as you earn it, rather than waiting until the end of the year to pay one big lump sum. Estimated tax payments help people meet this rule.
Here are the typical due dates for a calendar-year taxpayer:
- Payment 1 (January 1 – March 31 income): April 15
- Payment 2 (April 1 – May 31 income): June 15
- Payment 3 (June 1 – August 31 income): September 15
- Payment 4 (September 1 – December 31 income): January 15 of the next year
As you can see, the second payment period is only two months long, while the others are three or four months. This unevenness is the main reason why they aren’t true calendar quarters. And it explains why you will see different amounts in different screens within Seller Ledger.
Important Note
If a due date falls on a weekend or a legal holiday, the deadline is typically pushed to the next business day.
When Did It Change and Why?
Estimated taxes used to be paid based on strict calendar quarters, with payments typically due on the 15th of April, July, October, and January. The change to the current, somewhat quirky schedule happened back in the 1960s, specifically with the Tax Adjustment Act of 1966.
The main reason for this shift was to help the federal government’s budget. The federal fiscal year begins on October 1st. By moving the third payment due date from October 15th to September 15th, the government was able to collect a significant chunk of tax revenue before the start of its new fiscal year. This provided a quicker influx of cash.
This change left an extra month that needed to be accounted for in the payment schedule. Since the April 15th deadline for the first payment (and the annual tax filing deadline) was already well-established, and the January 15th deadline for the final payment covered the end of the calendar year, those dates largely stayed put. The logical place to absorb the shifted month was the second payment period, moving its due date from July 15th to June 15th. This is why the second “quarter” covers only April and May.
Essentially, the due dates were adjusted to align with the federal government’s fiscal year planning and cash flow needs, creating the slightly uneven “quarterly” schedule we have today.