Quarterly Taxes 101: What Every Business Owner Needs to Know
Every year around March and April, we all sit down to file our taxes and pay Uncle Sam his “fair share” of our hard-earned money. You can never avoid it.
But here’s the twist: for business owners, Uncle Sam doesn’t just show up once a year. Oh no. He comes around four times.
That’s right, when you’re self-employed or running a business, Uncle Sam wants his money now, not later. Unlike a normal W-2 job, your taxes aren’t withheld automatically. So if you’re making money but not setting any aside for taxes, Sam’s patience runs out quick.
Enter: Quarterly Taxes.
What Are Quarterly Taxes?
Quarterly taxes are estimated tax payments you send to the IRS four times a year. Think of them as “mini tax days” spread across the calendar.
Public companies report earnings in quarters. Sports have quarters. The IRS decided business owners should, too.
So instead of just writing one check in April, freelancers, contractors, and small business owners are expected to pay as they go.
Who Has to Pay?
The general rule: if you expect to owe $1,000 or more in taxes when you file, you need to make quarterly payments.
This includes:
Sole proprietors (self-employed, freelancers, contractors, side hustlers)
Partnerships (where income flows through to partners)
S-corporation owners (often paying themselves both a salary + distributions)
Basically: if taxes aren’t being withheld from your paycheck, the IRS expects you to pay as you go.
Why You’ll Owe More Than You Think (Self-Employment Tax)
Here’s the kicker: when you’re self-employed, you’re not just paying regular income taxes. You’re also paying both sides of Social Security and Medicare.
As a W-2 employee, you only see 7.65% come out of your paycheck.
But your employer quietly pays the other half for you.
When you’re self-employed? Congrats, now you’re the employee and the employer. That’s 15.3% right off the top.
And that’s before your federal income tax rate and your state taxes get added on.
So if you’ve ever wondered why your tax bill feels so brutal as a freelancer or business owner… that’s why.
How Do You Calculate Them?
There are a couple ways to figure it out:
Rule of thumb: set aside about 25–30% of your profit for taxes, then pay one-quarter of that each quarter.
IRS safe harbor rules:
Pay at least 90% of this year’s tax liability, OR
Pay 100% of last year’s taxes (110% if income > $150k).
Simplified Example (Round Numbers):
Say last year your business made $100,000 and your tax bill came to about $20,000.
To stay in the “safe harbor,” you’d pay $5,000 each quarter this year.
But if your business grows to $150,000 this year, your tax bill may be closer to $30,000, meaning quarterly payments should be closer to $7,500.
If you stick with $5,000, you’ll still owe around $10,000 come April — plus possible penalties.
Real-Life Example (South Dakota, Married Filing Jointly, 2025 Brackets)
Scenario 1: $100,000 Net Business Income – Self-Employment Tax: $15,300 – Federal Income Tax: $7,005 – Total Taxes: ~$22,300 – Safe Harbor Quarterly Payment: ~$5,600 each quarter
Scenario 2: $150,000 Net Business Income – Self-Employment Tax: $22,950 – Federal Income Tax: $13,968 – Total Taxes: ~$36,900 – Safe Harbor Quarterly Payment: ~$9,200 each quarter
Notice the jump: when your income grows, your quarterly payments need to grow too, or you’ll be left with a big bill (and possible penalties) at tax time.
When Are They Due?
Mark your calendar:
April 15 (Q1)
June 15 (Q2)
September 15 (Q3)
January 15 of the following year (Q4)
What Happens If You Miss?
If you skip a payment, the IRS tacks on a penalty. It’s not usually life-ruining, but it stings.
At tax time, your return will include Form 2210, that’s where the IRS calculates your underpayment penalty. If you didn’t include it, don’t worry, they’ll happily send you a notice with the bill.
Think of it as interest for paying late. The longer you wait, the more it costs.
How Do You Pay?
IRS Direct Pay (fastest + easiest online option)
EFTPS (Electronic Federal Tax Payment System)
Mailing a check (old school)
Through tax software if you file electronically
And don’t forget: many states require quarterly payments too.
Pro Tips
Open a separate savings account just for taxes. Every time you get paid, move 25–30% of your profit straight into that account.
Don’t just base your payments on last year, plan ahead for how much you’re bringing in this year.
If your income is uneven or growing, working with an advisor who does tax planning (hint: that’s me 👋) can help you calculate, adjust, and make sure you’re paying the right amount at the right time.
Closing Thought
Quarterly taxes aren’t fun. Nobody likes paying Uncle Sam early. But it’s the price of freedom when you’re self-employed.
Don’t wait until April 15 to realize you’re way behind. Plan ahead, pay as you go, and keep Uncle Sam off your back.
And if you’re not sure how much to pay or how to set up your system, that’s exactly where I help clients find peace of mind.
