Overview
Four times a year, we utilize your income to help determine how much you owe in estimated tax each quarter. The quarterly estimated tax is paid toward your tax bill in quarterly installments towards federal and state taxes.
What are quarterly tax estimates?
If you are self-employed and will owe more than $1,000 in taxes at the end of the fiscal year, the IRS requires you to pay your taxes four times a year in estimated payments. These payments are standard for those not working for an employer and, therefore, not subject to tax withholding.
Who should pay quarterly tax estimates?
- A sole proprietor
- A shareholder of an S Corporation
- A member of a partnership that conducts business, such as an LLC
- An independent contractor collecting 1099 income
How are quarterly tax estimates calculated?
Estimated taxes are typically calculated using the safe harbor method, which takes your prior year's tax liability and the amount of taxes you owed last year based on last year’s income and adds it to your total income for the current tax year.
At Heard, we provide both federal quarterly tax estimates and estimates for your state ( if applicable.) We utilize your tax filing information (such as your income level and filing status) to provide these estimates for you while taking into consideration tax deductions and other eligible taxes you may owe. See: How does Heard calculate quarterly estimated taxes?
When are quarterly taxes due?
For estimated tax purposes, the year is divided into four payment periods, each with a specific payment due date.
| Months accounted for in the calculation | Payment Due Date | |
| Quarter 1 | January and February | April 15th |
| Quarter 2 | January - April | June 15th |
| Quarter 3 | January - July | September 15th |
| Quarter 4 | January - November | January 15th |
If you don't pay enough tax by the due date of each of the payment periods, you may be charged a penalty even if you are due a refund when you file your income tax return.
If the payment due date falls on a weekend or holiday, the deadline moves to the next business day.
Do I have to pay quarterly payments as an S Corporation?
Yes, you are required to pay quarterly taxes. S Corps are pass-through entities, meaning that the business' income and losses are passed through to the shareholders on their personal tax returns.
Although you pay payroll taxes on your W-2 wages through your payroll provider, you must still pay income tax on the business earnings to the IRS and your state entity (if applicable). However, you will notice that your estimates are substantially lower than they would be as a Sole Proprietor.
Payment and avoiding penalties
We highly recommend paying these on a quarterly basis to keep an accurate and ongoing financial picture of your practice throughout the year. You'll also reduce your risk of underpayment penalty and interest from the IRS and state tax authorities.
If you don’t pay enough tax through withholding and estimated tax payments, you may have to pay a penalty. You also may have to pay a penalty if your estimated tax payments are late, even if you are due a refund when you file your tax return.