Overview

Estimated taxes are the system the IRS uses to collect income tax (and self-employment tax) as you earn or receive income during the year when there is no employer withholding. For farmers and fishermen — whose income is typically seasonal and variable — the IRS provides special options that can reduce the burden of quarterly payments. These rules, while helpful, require accurate recordkeeping and proactive planning to avoid underpayment penalties. (See IRS: Farmers and Fishermen and Publication 505.)

Who must make estimated tax payments?

You generally need to pay estimated taxes if you expect to owe $1,000 or more in tax when you file your return after subtracting withholding and refundable credits (IRS threshold). That applies to most self-employed taxpayers, including farmers and fishermen reporting net profit on Schedule F or Schedule C, and to owners of fishing operations.

Special rule for farmers and fishermen: If at least two-thirds of your gross income for the current year or the preceding year comes from farming or fishing, you may qualify to pay your entire tax with your return and not make quarterly estimated payments. For calendar-year taxpayers, that return and payment are generally due by March 1 of the following year (confirm current IRS guidance at the link below). This option can help seasonal earners avoid multiple estimated payments but requires meeting the two-thirds test and paying all tax due with the return. (IRS: Farmers and Fishermen)

Key filing options and rules

  • Quarterly estimated payments: The default path for most taxpayers is paying by the regular estimated tax due dates (April 15, June 15, September 15, and January 15 of the next year). Use Form 1040-ES to estimate and pay federal estimated taxes.
  • Annual payment option for qualifying farmers/fishermen: If you meet the two-thirds gross income test from farming/fishing, you can file and pay all tax by the earlier due date (usually March 1 for calendar-year taxpayers) and skip quarterly payments. See IRS guidance: https://www.irs.gov/individuals/farmers-and-fishermen
  • Annualized income method: If your income is uneven across the year, you can use the annualized installment method (Worksheet in Publication 505 or Form 2210) to compute required payments so you aren’t penalized for low income in early quarters and a big seasonal inflow later.

Safe-harbor rules and penalties (what to watch for)

To avoid underpayment penalties, you generally must pay at least one of the following during the year:

  • 90% of the tax you expect to owe for the current year; or
  • 100% of the tax shown on your prior-year return (110% if your adjusted gross income was over $150,000 for the prior year — threshold in effect as of 2025); or
  • For farmers and fishermen who meet the two-thirds rule, pay the entire tax by the filing deadline (usually March 1) and you will not be penalized for not making quarterly payments.

If you underpay, the IRS may charge an interest penalty computed using Form 2210 (Underpayment of Estimated Tax by Individuals, Estates, and Trusts). Publication 505 explains the penalty calculation and exceptions. (IRS Publication 505)

Practical, step-by-step calculation for a farming or fishing operation

  1. Estimate your gross receipts for the year and subtract expected deductible expenses to get projected net farm/fishing income.
  2. Estimate other income (interest, rents, side work) and adjustments (self-employment tax, retirement contributions, health insurance deductions).
  3. Compute expected total tax: federal income tax plus self-employment tax (SE tax). Self-employment tax is calculated on Schedule SE; historically it’s approximately 15.3% on net self-employment earnings, with a deductible half of the SE tax. Use current rates and thresholds from IRS instructions.
  4. Apply safe-harbor tests: decide whether you’ll use the 90% current-year rule, the prior-year rule, or — if eligible — pay annually under the farmers/fishermen rule.
  5. If using quarterly payments, divide the annual required payment by the number of installments due (four) or use annualized method if your income is concentrated in specific months.
  6. Make payments via EFTPS, IRS Direct Pay, or with Form 1040-ES vouchers. Keep confirmation records.

Example: Seasonable Catch

  • A fisherman projects $60,000 net income for the year. Estimated income tax + SE tax totals $13,000.
  • If the prior-year tax was $9,000, paying that amount during the year (or paying 90% of $13,000 = $11,700) may meet safe-harbor requirements. If the fisherman qualifies under the two-thirds rule and expects most income from fishing, they could instead wait and pay the tax with the return by the annual filing date for farmers/fishermen.

Using the annualized income installment method

If you don’t qualify for the two-thirds rule or prefer not to wait, the annualized method calculates required payments based on income actually earned during each payment period. This method helps seasonal businesses avoid penalties when large receipts occur late in the year. Form 2210 and Publication 505 include worksheets and examples.

Recordkeeping and cash-flow tips I recommend from practice

  • Maintain a dedicated tax-savings account and transfer a set percentage of gross receipts into it whenever you sell crops or a vessel unloads a catch. This reduces liquidity stress at payment time.
  • Use farm/fish business accounting software or a simple ledger to track daily receipts, expenses, and depreciable asset purchases (Section 179 and MACRS rules may apply).
  • Revisit estimates quarterly and adjust your payments if revenue materially changes.
  • Consider estimated tax automations: EFTPS (Electronic Federal Tax Payment System) allows scheduling multiple payments to avoid missed deadlines.

Common mistakes and how to avoid them

  • Underestimating self-employment tax: many producers focus only on income tax and forget the 15.3% SE tax liability on net earnings. Factor SE tax into your estimated-payment calculations.
  • Ignoring state estimated tax rules: states often have different thresholds and schedules. Check your state department of revenue rules.
  • Waiting too long to adjust: if you have a big harvest or favorable market late in the year, use the annualized method rather than retroactively increasing prior payments.
  • Misapplying the two-thirds rule: document the sources of gross income to prove eligibility; the IRS may request records.

How to pay and deadlines

  • Typical federal estimated payment due dates: April 15, June 15, September 15, and January 15 of the following year (calendar-year taxpayer). If a date falls on a weekend or holiday, the due date moves to the next business day.
  • Farmers and fishermen who qualify to pay with the return generally must file by the earlier deadline (often March 1 for calendar-year filers) to avoid penalties. Confirm the current year’s deadline on the IRS site.
  • Payment methods: EFTPS, IRS Direct Pay, credit/debit card (fees may apply), or mailing the voucher in Form 1040-ES.

Interlinks (related FinHelp.io guides)

Frequently asked questions

Q: If my income falls below $1,000 tax liability, do I still need to make payments?
A: No — if you expect to owe less than $1,000 after withholding and refundable credits, you generally do not need to make estimated payments.

Q: What if my harvest yields a surprise windfall late in the year?
A: Use the annualized installment method or, if eligible, the farmers/fishermen annual payment rule. Both approaches can reduce or eliminate penalties compared with pro-rating evenly across quarters.

Q: Can I reduce estimated payments by increasing withholding on other income?
A: Yes. Increasing withholding on W-2 wages or pension income can be an alternative to making estimated payments because withholding is treated as paid evenly throughout the year for penalty calculations.

Final notes and professional disclaimer

The guidance above summarizes federal estimated tax rules and practical steps for farmers and fishermen as of 2025. For definitive, personalized advice — especially where state taxes, business structure, or large capital investments are involved — consult a CPA or enrolled agent familiar with agricultural or fisheries taxation. This article is educational and not a substitute for professional tax advice.

Authoritative sources: IRS — Farmers and Fishermen (https://www.irs.gov/individuals/farmers-and-fishermen); IRS Publication 505, Tax Withholding and Estimated Tax (https://www.irs.gov/forms-pubs/about-publication-505); IRS Estimated Taxes (https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes).