The IRS does not wait until April to collect what you owe. As a self-employed person or business owner, you are required to pay taxes four times a year. If you do not, you will pay penalties whether or not you file on time. This is one of the most common and most expensive surprises for new business owners.
Why Quarterly Payments Exist
When you earn a paycheck as an employee, your employer withholds federal income tax and FICA taxes. When you are self-employed, no one withholds anything. You are responsible for both the income tax and the self-employment tax (15.3% on the first $160,200 of net earnings). If you do not pay throughout the year, you owe it all at once in April, plus an underpayment penalty on top.
The Four Deadlines
Q1 (Jan 1 to Mar 31): Due April 15. Q2 (Apr 1 to May 31): Due June 16. Q3 (Jun 1 to Aug 31): Due September 15. Q4 (Sep 1 to Dec 31): Due January 15 of the following year. Missing any of these generates an automatic underpayment penalty, even if you pay everything by April.
How to Calculate What You Owe
The safest method is the prior year safe harbor: pay at least 100% of last year’s tax liability (110% if your AGI exceeded $150,000) across the four quarters, and you will avoid penalties regardless of how your income changes. If your income this year is significantly different, calculate 90% of what you expect to owe.
What to Do If You Missed a Payment
Pay as soon as possible. The penalty is calculated based on how much you owe and how long it has been outstanding. A partial catch-up payment still reduces the total penalty. Waiting only makes it larger.
Stop guessing. Start planning. Book a Tax Planning Session
Shannon C. Williams | CEO, 360 Global Business LLC | 27 Years Federal Tax Educator and Consultant | SDVOSB · WOSB · MBE | U.S. Air Force Veteran | 1-855-500-1514 | taxes@360globalbusiness.com