Quarterly Estimated Tax Payments for Small Business Owners: What They Are & How to Avoid IRS Penalties
What Are Quarterly Estimated Tax Payments?
If you're a new small business owner, freelancer, or consultant, you may be surprised to learn that taxes aren't just a once-a-year obligation anymore. When you're self-employed, the IRS expects you to pay taxes throughout the year using quarterly estimated tax payments.
These payments cover:
Income tax
Self-employment tax (Social Security and Medicare)
Other taxes owed if you don't have withholding from an employer
Do I Need to Pay Estimated Taxes as a Small Business Owner, Freelancer, or Consultant?
In most cases, yes.
If you expect to owe $1,000 or more in taxes for the year after subtracting withholding and credits, you’re required to make quarterly payments.
Skipping quarterly payments can trigger an underpayment penalty, even if you pay your entire tax bill by April 15. The IRS charges this penalty like interest on a late payment, and it’s calculated based on how much you underpaid and how late you were.
Penalties can be minor at first—maybe $100–$300—but they add up quickly if you miss multiple quarters or consistently underpay. Many states also apply their own penalties, so it’s not just a federal issue.
When Are Estimated Tax Payments Due?
The IRS divides the year into four payment periods:
April 15 – for income earned Jan 1 – Mar 31
June 15 – for income earned Apr 1 – May 31
Sept 15 – for income earned Jun 1 – Aug 31
Jan 15 (following year) – for income earned Sep 1 – Dec 31
If the due date falls on a weekend or holiday, it rolls to the next business day.
How Much Should I Pay Each Quarter?
There are two main ways to calculate your estimated tax payments:
The Safe Harbor Method (Simple & Safe)
Pay 100% of last year’s total tax liability (or 110% if your income was over $150K).
Divide that number by 4 and make equal quarterly payments.
This avoids penalties—even if your income increases.
The Actual Income Method (More Accurate)
Estimate your income and expenses each quarter.
Calculate your estimated tax based on current earnings.
This method can save money if your income fluctuates, but it requires more effort—and more bookkeeping accuracy.
How Do I Make Quarterly Payments?
You can pay your estimated taxes online, by app, or by mail:
💻 IRS Direct Pay
🏦 EFTPS (Electronic Federal Tax Payment System)
📱 IRS2Go App
📬 Paper check with Form 1040-ES
Each state has its own portal for state estimated taxes—check your state’s Department of Revenue website.
Tips to Stay Ahead of Estimated Taxes
Open a separate tax savings account. Set aside 20–25% of your income as it comes in.
Use bookkeeping software. Xero (or even a simple spreadsheet) helps you track income and expenses for accurate calculations.
Schedule reminders. Put all four due dates on your calendar.
Talk to a pro. An accountant or tax advisor can guide you and help you avoid penalties.
Need Help With Quarterly Tax Payments?
Beyond the Books offers Quarterly Tax Support to help small business owners and independent contractors stay on track:
✅ We review your bookkeeping
✅ Meet with you briefly to review your financials
✅ Calculate your accurate quarterly tax payments
📦 $250/quarter for small business owners
📦 $100/quarter for individuals with minimal 1099, consulting, or contractor income
No stress. No guesswork. Just smart planning.
👉 Email us at cat@beyondthebooks.co to get started.
Final Thought
Quarterly taxes can feel like a chore, but they’re one of the easiest ways to stay financially stable and avoid an ugly surprise at tax time. A little planning each quarter goes a long way toward building a more confident, tax-smart business.
