Quarterly Estimated Taxes for Business Owners: What You Need to Know to Avoid IRS Penalties
- Marcin Rapacz
- Jul 27
- 3 min read
By Marcin Rapacz, CPA
One of the conversations I have most often with new business owners goes something like this:
"I thought I'd just pay my taxes when I filed my return."
Unfortunately, that's not how it works.
If you're self-employed or own a business, the IRS generally expects you to pay your taxes throughout the year, not just when you file your tax return. These payments are called quarterly estimated tax payments, and missing them can result in penalties and interest—even if you ultimately pay your tax bill in full.
The good news? Once you understand how estimated taxes work, they're much easier to manage.
What Are Quarterly Estimated Taxes?
Quarterly estimated taxes are payments made directly to the IRS (and often your state) throughout the year to cover taxes on income that isn't subject to withholding.
This commonly includes:
Business profits
Self-employment income
Rental income
Investment income
Partnership income
S corporation income
Side hustle income
Unlike employees who have taxes withheld from every paycheck, business owners are generally responsible for making these payments themselves.
Who Needs to Pay Quarterly Estimated Taxes?
You may need to make estimated tax payments if you expect to owe $1,000 or more in federal tax after subtracting withholding and refundable credits.
This commonly applies to:
Sole proprietors
Single-member LLCs
Multi-member LLCs
Partners in partnerships
S corporation shareholders
Independent contractors
Freelancers
Consultants
Gig workers
Even if your business is part-time, you may still have an estimated tax obligation.
2026 Estimated Tax Due Dates
Mark these dates on your calendar.
Payment | Due Date |
1st Quarter | April 15, 2026 |
2nd Quarter | June 15, 2026 |
3rd Quarter | September 15, 2026 |
4th Quarter | January 15, 2027 |
If a due date falls on a weekend or federal holiday, the deadline moves to the next business day.
How Do You Calculate Estimated Taxes?
This is where many business owners become overwhelmed.
The IRS doesn't send you a bill telling you how much to pay. Instead, you're expected to estimate your annual tax liability.
Generally, you'll need to estimate:
Your expected business income
Other household income
Business deductions
Tax credits
Self-employment tax
Federal income tax
State income tax (if applicable)
Your estimated tax payments are then based on those projections.
If your income changes significantly during the year, your estimated payments should be reviewed and adjusted.
The Safe Harbor Rule Can Help You Avoid Penalties
Many people don't realize you don't always have to pay exactly what you'll owe to avoid penalties.
In many situations, you can avoid the federal underpayment penalty by paying the lesser of:
90% of your current year's total tax, or
100% of your prior year's tax liability (110% if your prior year's adjusted gross income exceeded certain IRS thresholds).
This is known as the safe harbor rule, and it can be especially helpful for business owners whose income fluctuates throughout the year.
What Happens If You Don't Make Quarterly Payments?
If you don't pay enough throughout the year, the IRS may assess:
Underpayment penalties
Interest charges
These charges can apply even if you receive a refund later or pay the balance when filing your return.
The longer the underpayment remains outstanding, the more the penalty can grow.
How Can Business Owners Make Estimated Tax Payments?
The IRS offers several convenient payment options.
Many of my clients choose to pay online because it's fast, secure, and provides immediate confirmation.
Options include:
IRS Direct Pay
Electronic Federal Tax Payment System (EFTPS)
IRS Online Account
Debit or credit card
Mailing Form 1040-ES with a check
Ohio and many other states also require separate estimated tax payments if you expect to owe state income tax.
My Advice as a CPA
One of the biggest mistakes I see is business owners waiting until March to figure out whether they should have made estimated tax payments.
By then, it's usually too late to avoid penalties.
Instead, I recommend reviewing your income every quarter—not just for estimated taxes, but also for tax planning opportunities.
Sometimes increasing retirement contributions, purchasing business equipment, or adjusting your entity structure can reduce your tax liability before the year ends.
Estimated tax planning shouldn't simply be about avoiding penalties. It should be part of your overall tax strategy.
Need Help Calculating Your Estimated Tax Payments?
Every business is different.
A Schedule C sole proprietor has different tax planning opportunities than an S corporation owner or a partner in an LLC.
At Rapacz CPA Tax & Accounting Services, we help business owners estimate quarterly tax payments, minimize underpayment penalties, and identify legal strategies to reduce their overall tax liability.
If you're unsure how much you should be paying—or whether you're paying too much—I'd be happy to help.
📞 440-723-8650
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