How Founders Can Handle Quarterly Taxes with Confidence
Learn how to pay quarterly estimated taxes as a founder. Covers deadlines, how to calculate what you owe, payment options, and how to avoid IRS underpayment penalties.
Bizee Editorial Staff
Editorial Team
Introduction
When you work for yourself, no employer withholds taxes from your pay. The IRS expects you to cover that yourself — four times a year. This guide walks through what quarterly estimated taxes are, when they're due, how to calculate what you owe, and how to avoid an underpayment penalty.
What quarterly taxes are
Quarterly taxes are estimated tax payments you make to the IRS four times a year to cover income you earn without withholding. When you're self-employed or running a business, no employer pulls taxes from your pay — so the IRS requires you to pay as you go. These payments cover both federal income tax and self-employment tax, which funds Social Security and Medicare.
The threshold that triggers the requirement: if you expect to owe at least $1,000 in federal taxes for the year after subtracting any withholding and refundable credits, you need to make quarterly payments. Most founders hit that threshold quickly once their business starts generating income.
Self-employment tax is 15.3% of net earnings — 12.4% for Social Security and 2.9% for Medicare. That rate catches a lot of first-time founders off guard, because employees only see half of it on their pay stub. When you're self-employed, you're responsible for both halves.
Quarterly tax deadlines
The IRS sets 4 payment deadlines each year, and they don't line up with equal three-month intervals — which trips people up the first time. Mark these dates now and set calendar reminders before each one.
- April 15 — covers income earned January 1 through March 31
- June 15 — covers income earned April 1 through May 31
- September 15 — covers income earned June 1 through August 31
- January 15 of the following year — covers income earned September 1 through December 31
If a deadline falls on a weekend or federal holiday, the payment is due the next business day. Missing a deadline doesn't mean you owe the full year's taxes immediately — it means the IRS calculates an underpayment penalty on the amount that was due for that quarter.
How to calculate your estimated taxes
To calculate your quarterly estimated taxes, estimate your total income for the year, subtract your business deductions, apply your income tax rate and the 15.3% self-employment tax rate, then divide the total by 4. The IRS provides Form 1040-ES, which includes a worksheet that walks through each step.
If your income varies month to month — which is common in the early stages of a business — the prior-year safe harbor is a reliable fallback. Pay 100% of what you owed in federal taxes last year, spread across the 4 quarterly deadlines, and you won't owe an underpayment penalty regardless of what you earn this year. If your adjusted gross income last year exceeded $150,000, that threshold rises to 110%.
The prior-year safe harbor is especially useful in year one, when you don't have a full picture of what the business will earn. A tax professional can help you figure out which calculation method makes sense for your situation.
How to pay quarterly taxes
The IRS offers several ways to pay estimated taxes. Paying online is faster and gives you an instant confirmation — which matters when you're trying to prove a payment was made on time.
IRS Direct Pay
IRS Direct Pay lets you pay directly from a checking or savings account at no cost. No registration required. Go to irs.gov/payments, select "Estimated Tax" as the reason, and follow the prompts. You'll get a confirmation number immediately.
Electronic Federal Tax Payment System (EFTPS)
EFTPS requires a one-time enrollment but lets you schedule payments in advance — useful if you want to set up all 4 quarterly payments at the start of the year and not think about it again. Enrollment takes a few days, so don't wait until the deadline to sign up.
Debit or credit card
You can pay by debit or credit card through IRS-approved processors, but a processing fee applies. For most founders, Direct Pay or EFTPS is the better option since both are free.
You can mail a check with the Form 1040-ES payment voucher to the IRS address for your location. If you go this route, mail early — the postmark date counts, but processing delays can create confusion if a payment is close to the deadline.
How to avoid an underpayment penalty
The IRS charges an underpayment penalty when you don't pay enough estimated tax by each quarterly deadline. The penalty is calculated quarterly based on the federal short-term interest rate plus 3 percentage points, compounded daily — so it adds up faster than most people expect.
There are 2 ways to avoid the penalty entirely. First, pay at least 90% of what you'll owe for the current year across your 4 quarterly payments. Second, use the prior-year safe harbor: pay 100% of last year's tax liability in equal installments (110% if your adjusted gross income last year exceeded $150,000). Either method works — the safe harbor is easier to calculate when your income is unpredictable.
You also won't owe a penalty if your total tax bill for the year is under $1,000 after withholding and credits. If you underpaid and want to check whether a penalty applies, use IRS Form 2210.
How to stay organized between quarters
Quarterly taxes are manageable when you build a few habits early. The founders who struggle at tax time are usually the ones who haven't tracked income or set money aside — not the ones who got the math wrong.
Set aside a percentage of every payment you receive — 25% to 30% is a common starting point for most tax brackets — into a separate account you don't touch for other expenses. That way, when a quarterly deadline arrives, the money is already there.
- Track income and deductible expenses monthly — don't let it pile up
- Keep records of every payment you make to the IRS, including confirmation numbers
- Bookmark IRS Direct Pay and Form 1040-ES so you're not hunting for them at deadline time
- Set calendar reminders 2 weeks before each quarterly deadline
- Talk to a tax professional if your income varies significantly quarter to quarter
FAQ
Generally, yes — if you expect to owe at least $1,000 in federal taxes for the year after subtracting any withholding and refundable credits, the IRS requires quarterly estimated payments even in your first year of business. There's no grace period for new founders. If you're unsure whether you'll hit the $1,000 threshold, a tax professional can help you figure out whether you need to start making payments right away.
Yes, in most cases. A single-member LLC is taxed as a sole proprietorship by default, and a multi-member LLC is taxed as a partnership — both are pass-through structures where income flows to the owner's personal return. If that income will generate at least $1,000 in federal tax for the year, quarterly estimated payments are required. LLCs that have elected S Corporation or C Corporation tax treatment follow different rules, so check with a tax professional if your LLC has made a tax election.
The IRS charges an underpayment penalty calculated at the federal short-term interest rate plus 3 percentage points, compounded daily on the amount you should have paid by each quarterly deadline. The penalty applies per quarter, not just at year end — so missing the April 15 payment and catching up in September still means you owe a penalty on the April shortfall. Use IRS Form 2210 to calculate whether a penalty applies and how much.
It depends on how much you expect to owe. If your total federal tax bill for the year — after withholding and refundable credits — will be $1,000 or more, you're required to make quarterly estimated payments. If you're self-employed with no other withholding, you'll almost certainly hit that threshold once your business earns meaningful income. The Form 1040-ES worksheet helps you run the numbers based on your expected income and deductions.
As a sole proprietor, you pay quarterly estimated taxes using Form 1040-ES. The fastest way is through IRS Direct Pay at irs.gov/payments — no registration required, and you get an instant confirmation. You can also use EFTPS if you want to schedule payments in advance. Payments are due April 15, June 15, September 15, and January 15 of the following year. Your quarterly payment covers both income tax and self-employment tax, which is 15.3% of net earnings.
Quarterly taxes — formally called estimated tax payments — are payments self-employed individuals and business owners make to the IRS four times a year to cover taxes on income that isn't subject to withholding. They cover federal income tax and, for self-employed founders, self-employment tax (Social Security and Medicare). Businesses structured as C Corporations pay estimated corporate income taxes on a similar quarterly schedule using different forms.
