Quarterly Estimated Taxes: What They Are and How to Stay on Top of Them

One common surprise for new business owners is the requirement to pay taxes quarterly. Unlike employees, who have taxes withheld from their paychecks, business owners must estimate and pay taxes throughout the year.

If you expect to owe more than $1,000 in taxes, you're generally required to make four quarterly payments in April, June, September, and January. Failure to pay on time can result in underpayment penalties. Calculate your estimated taxes based on your current year's expected income or use last year's tax liability as a safe harbor.

By budgeting for quarterly taxes and making timely payments, you avoid penalties and reduce the risk of an overwhelming tax bill at year-end.