How to Estimate Quarterly Taxes as a Small Business Owner
If you’re self-employed or run a small business, you’ve probably heard about quarterly taxes. But what are they, and how do you estimate them? 🤔
Don’t worry—I’ve got you covered! This guide will walk you through what quarterly taxes are, how to estimate them, and how to pay them so you can stay compliant and avoid IRS penalties.
This guide is for informational purposes only and is not intended as tax advice. For personalized guidance, consider working with a CPA or tax professional.
What Are Quarterly Taxes?
Unlike W-2 employees who have taxes automatically withheld from their paychecks, self-employed individuals, freelancers, and business owners must pay their own taxes. The IRS requires these payments four times a year—hence the term quarterly estimated taxes.
You’ll need to pay quarterly taxes if you expect to owe at least $1,000 in taxes for the year. This applies to: ✅ Sole proprietors ✅ Freelancers & gig workers ✅ LLC owners (single-member or multi-member) ✅ S-corp shareholders (if you don’t take a salary)
How to Estimate Your Quarterly Taxes
Follow these three simple steps to calculate your estimated tax payments:
Step 1: Estimate Your Taxable Income
🔹 Look at last year’s total income and adjust for any expected increases or decreases. 🔹 Subtract business expenses (like office supplies, marketing costs, and mileage).
💡 Example: If you expect to earn $80,000 this year and have $20,000 in business expenses, your taxable income would be: 👉 $80,000 - $20,000 = $60,000
Step 2: Calculate Your Tax Liability
Self-employed individuals typically pay: 📌 Self-employment tax: 15.3% (Social Security & Medicare) 📌 Federal income tax: Varies by tax bracket (10%-37%)
💡 Quick Estimate Formula: 1️⃣ Multiply your taxable income by 15.3% for self-employment tax. 2️⃣ Use the IRS tax brackets to estimate federal income tax. 3️⃣ Add both together to get your total estimated tax liability.
💡 Example Calculation:
Self-employment tax: $60,000 × 15.3% = $9,180
Federal income tax (based on tax brackets): About $6,500
Total annual tax owed: $15,680
Step 3: Divide by 4 for Quarterly Payments
Since you pay four times a year, divide your total estimated tax by 4: 👉 $15,680 ÷ 4 = $3,920 per quarter
✅ Quarterly Estimated Tax Payments (Based on This Example):
April 15 – $3,920
June 15 – $3,920
September 15 – $3,920
January 15 (next year) – $3,920
1️⃣ QuickBooks Self-Employed & QuickBooks Online
✅ Automatically estimates quarterly taxes based on your income and expenses. ✅ Tracks business deductions (mileage, home office, etc.) to lower taxable income. ✅ Provides IRS payment reminders so you never miss a deadline. ✅ You can pay directly through QuickBooks via TurboTax integration.
💡 Best for: Freelancers, gig workers, and small business owners who want simple, automated tax tracking.
2️⃣ TurboTax Self-Employed
✅ Works with QuickBooks to pull income & expense data for accurate estimates. ✅ Offers a quarterly tax calculator and reminders for estimated payments. ✅ Can file and pay estimated taxes directly to the IRS.
💡 Best for: Those who want a tax-filing solution along with estimated tax calculations.
3️⃣ Xero
✅ Calculates estimated quarterly tax payments based on real-time financial data. ✅ Syncs with Gusto for payroll tax calculations if you pay yourself a salary. ✅ Offers integrations with tax software for easy filing.
💡 Best for: Small businesses looking for accounting + tax tools in one platform.
4️⃣ Wave Accounting (Free Option)
✅ Tracks income & expenses, but doesn’t auto-calculate estimated taxes. ✅ Offers a quarterly tax calculator tool for manual entry.
💡 Best for: Startups and solopreneurs who need basic tax estimates without extra cost.
5️⃣ Hurdlr
✅ Real-time tax estimates based on your income & write-offs. ✅ Auto-tracks mileage, expenses, and deductions to minimize tax liability. ✅ Provides IRS payment reminders.
💡 Best for: Gig workers, real estate agents, and independent contractors.
Which One Should You Choose?
🔹 If you already use QuickBooks → QuickBooks Self-Employed or QuickBooks Online is the easiest choice. 🔹 If you need a full tax-filing solution → TurboTax Self-Employed is great. 🔹 If you want a free option → Wave + IRS quarterly calculator works. 🔹 If you need real-time tracking → Hurdlr is a good alternative.
💡 Pro Tip: Even with software, it's a good idea to double-check tax estimates or work with a bookkeeper to ensure accuracy!
How to Pay Your Quarterly Taxes
You can pay your estimated taxes through: 💻 Online: IRS Direct Pay orEFTPS 📞 Phone: Call the IRS payment line 📬 Mail: Send a check with Form 1040-ES
How to Avoid IRS Penalties
⚠️ Pay on time – Missing a deadline could mean interest and penalties. ⚠️ Pay at least 90% of what you owe – If you underpay, the IRS may charge a penalty. ⚠️ Use last year’s taxes as a guide – If your income is unpredictable, base your payments on last year’s tax return.
Pro Tip: Set Aside 25-30% of Your Income for Taxes
To avoid scrambling for cash, set aside 25-30% of every paycheck into a separate savings account for taxes. That way, you’re always prepared!
Final Thoughts
Paying quarterly taxes doesn’t have to be stressful! By estimating your income, calculating your tax liability, and setting aside funds regularly, you’ll stay compliant and avoid any surprises during tax season. ✅
💬 Need help with bookkeeping and tax planning? Drop a comment or reach out—I’m here to help! 😊