AARP Hearing Center
Should I Be Making Quarterly Tax Payments?
Estimated tax payments aren’t just for business owners or self-employed workers — many retirees need to make them, too
Smart tax withholding strategies can help retirees avoid quarterly estimated tax payments and potential IRS penalties.
Pete Ryan
Key takeaways
- Retirees may need to make quarterly estimated tax payments to avoid penalties.
- Estimated taxes are typically due on April 15, June 15 and Sept. 15 of the current year and Jan. 15 of the following year.
- Having taxes withheld from your Social Security benefits might allow you to avoid paying quarterly taxes.
If you spent your life working for an employer, you probably didn’t think much about taxes until it came time to file your return. But after you retire, your tax responsibilities could become more complicated.
The IRS operates on a pay-as-you-go system, which means you’re expected to pay taxes on income received throughout the year. As a result, even if you pay everything you owe when you file your tax return by April 15, you could face underpayment penalties if you didn’t pay what you owed by the due date. The underpayment penalty amount is based on what you should have paid for a particular quarter and the interest rate the IRS charges for underpayments, which is adjusted quarterly. So you could end up owing an underpayment for one quarter but not the others.
More Ways to Benefit
- Related Benefit 1
- Related Benefit 2
- Related Benefit 3
- Related Benefit 4
- Related Benefit 5
That isn’t a problem when you’re working and have taxes withheld from your paycheck, but if you have other income — such as interest earned on savings, investment income or Social Security retirement benefits — you may need to make an estimated tax payment every quarter to avoid underpayment penalties. And if you live in a state with an income tax, you may need to make estimated tax payments to your state, too.
You generally won’t incur a penalty if you owe less than $1,000 when you file your return, or if your withholding and quarterly estimated tax payments equal at least 90 percent of the amount you owe for the year. You’re also most likely off the hook if you paid at least 100 percent of the tax shown on your tax return for the previous year, or 110 percent if your adjusted gross income for the previous year was more than $75,000 if you’re single or $150,000 if you’re married and file jointly. Estimated taxes are typically due on April 15, June 15 and Sept. 15 of the current year and Jan. 15 of the following year.
Two workarounds to consider
If you know how much taxable income you’ll receive for the year, calculating your estimated tax payments is fairly straightforward. AARP offers a calculator you can use to estimate your federal taxes.
If you’re retired, however, determining how much income you’ll earn in a particular year can be a challenge, one I’ve wrestled with in my household. While I know how much my husband and I will receive from IRA withdrawals and Social Security, my self-employment income as a freelancer is uneven. Likewise, the income we receive from our taxable accounts can vary widely from year to year, depending on stock market returns and interest rates.
Fortunately, there are a couple of strategies you can employ to avoid paying estimated taxes without triggering an underpayment penalty.
Have taxes withheld from your Social Security benefits
Many new retirees are surprised to discover they owe taxes on a portion of their Social Security benefits. If most of your income comes from Social Security, totals less than the IRS’s base amount of $25,000 per year, and you file as single, head of household or qualifying spouse ($32,000 per year for married couples filing jointly), you don’t have to worry about this. But if your income exceeds those thresholds, you will owe taxes on up to 85 percent of your Social Security benefits.
The One Big Beautiful Bill Act, enacted in July 2025, did not eliminate taxes on Social Security retirement benefits. However, a new $6,000 deduction for taxpayers ages 65 and older will reduce taxable income for some people to the point where they’ll owe no federal taxes, effectively eliminating taxes on their Social Security benefits. You don’t have to itemize to claim this deduction, but it phases out for single taxpayers with a modified adjusted gross income (MAGI) over $75,000, and it phases out for married couples who file jointly and have a MAGI above $150,000
The IRS has an online tool you can use to determine how much of your Social Security benefits are taxable. If you determine that you owe taxes on your benefits, you can ask Social Security to withhold a portion of your benefits to pay them.
You can arrange to have 7, 10, 12 or 22 percent of your monthly payment withheld for taxes. If you don’t already have an online account with Social Security, go to the administration’s website and create one, then follow the instructions to have taxes withheld. Alternatively, you can call 800-772-1213 and tell a Social Security representative what percent of your monthly payment you want withheld for taxes.
Similarly, if you receive a pension, you can have taxes withheld from your payments by filing Form W-4P with your pension provider.
Increase withholding from your individual retirement accounts
When you take withdrawals from a traditional IRA, your provider is required to withhold 10 percent for federal taxes. However, you can ask them to withhold as much as you want to cover federal (and, in some cases, state) taxes. That means you can withhold enough from your IRA to cover taxes on other sources of income, such as from investments or part-time work. Taxes withheld from IRA distributions are treated by the IRS as if they were paid throughout the year, even if you take a lump-sum distribution.
This strategy is particularly useful for retirees who must take required minimum distributions (RMDs) from traditional IRAs and other tax-deferred accounts once they turn 73.
If you don’t need those withdrawals to pay expenses, you can wait until the end of the year to take your RMD and have enough withheld to cover taxes on your IRA and any other income you earned during the year. By doing so, you can avoid paying quarterly taxes without worrying about underpayment penalties — plus, funds in your IRA can grow throughout the year before you take your RMD.
Caveat: If your provider doesn’t allow you to withhold state taxes, you may still need to make estimated tax payments to your state.
AARP Membership
Join AARP for only $15 per year with automatic renewal. Get instant access to members-only products and hundreds of benefits, a free second membership, and a subscription to AARP The Magazine.
You Might Also Like
Choosing Between a Bank and a Credit Union
Understand the key differences before opening an account
Are Charity Donations Tax-Deductible?
If you give money in 2026, make sure to keep your receipts
Tax Credits Vs. Tax Deductions
Both can lower your tax bill, but they differ in significant ways