How Quarterly Taxes Work & How to Estimate What You Owe (with an impending deadline of Jan 15th coming up).
Another quarterly tax deadline is right around the corner, and if you’re self-employed, you’ve probably felt that familiar mix of confusion and stress:
“How much am I supposed to pay?”
“How does the IRS even calculate this?”
“What if I get it wrong?”
Quarterly taxes sound complicated, but once you understand the basics, they’re surprisingly manageable…particularly when you have clean books to work from.
What Are Quarterly Estimated Taxes?
When you work a regular job, taxes are taken out of every paycheck automatically. When you work for yourself, that doesn’t happen.
Instead, the IRS expects you to pay taxes throughout the year based on your profit.
These payments are called quarterly estimated taxes, and they cover:
• Federal income tax
• Self-employment tax
• State income tax (if you live in a state like California)
If you expect to owe $1,000 or more in taxes for the year, you’re required to pay quarterly.
This includes:
• Freelancers
• Coaches
• Consultants
• Contractors
• LLC owners
• Service-based businesses
• Anyone earning self-employment income
When Are Quarterly Taxes Due?
Here are the four IRS deadlines:
• January 15
• April 15
• June 15
• September 15
They do not line up with normal calendar quarters, so don’t try to make sense of that part — just mark the dates on your calendar.
What Goes Into Your Quarterly Tax Payment?
Your quarterly payment is based on your profit, not your revenue.
Profit = income minus business expenses
Each payment includes:
• Self-employment tax (15.3% for Social Security + Medicare)
• Federal income tax (based on your tax bracket)
• State income tax (varies by state)
If your bookkeeping is behind, this becomes almost impossible to calculate accurately.
How to Estimate Your Quarterly Taxes
Here are two simple methods, depending on how accurate you want to get.
Option A: Quick Rule-of-Thumb Method (Good for fast estimates)
Set aside:
• 25–30% of your profit for federal taxes
• 5–10% extra for state taxes if you live in a state like California
Most small service-based businesses land in the 30–40% total range.
This isn’t perfect, but it’s safe and keeps you out of penalty territory.
Option B: More Accurate Method (If your books are current)
1. Look at your year-to-date profit in QuickBooks.
2. Multiply that number by 15.3% for self-employment tax.
3. Add the percentage for your income tax bracket.
4. Add state tax if applicable.
5. Divide that number by four to get your quarterly estimate.
This is the method most accountants use but it starts with clean books.
What Happens If You Underpay?
The IRS charges underpayment penalties if you:
• Don’t pay enough throughout the year
• Pay late
• Try to “catch up” only at tax time
The good news:
Paying something is always better than paying nothing.
And estimating based on your actual profit greatly reduces the risk of penalties.
Why Bookkeeping Makes Quarterly Taxes Easy
When your bookkeeping is up to date, quarterly taxes become simple:
• You always know your real profit
• You can calculate accurate estimates
• No guessing, no surprises
• You avoid penalties
• You keep more of your money organized for taxes, instead of scrambling later
Bookkeeping isn’t just about tracking; it’s about giving you financial clarity so you can make smart decisions all year long.
If the upcoming deadline is stressing you out, I can help.
If you’re unsure what to pay — or if your books are behind and you need a clear profit number — I can review your numbers and estimate your quarterly payment for you.