If you own your own business, no one withholds taxes from your paycheck like they did when you were an employee. That means the IRS doesn't wait until April to collect what it's owed—it wants its share throughout the year, in installments. These installments are called estimated tax payments, and if you're unaware of them (or ignore them), they can turn into an expensive surprise when you file your tax return.
What are estimated payments?
When you work for someone else, your employer withholds taxes from each paycheck and sends them to the IRS for you. When you own a business—whether you operate as an independent contractor, an LLC, or own a restaurant—that withholding doesn't exist. The tax system expects you to pay taxes throughout the year as you earn income, rather than paying the entire amount at once when you file your return.
Who should do them?
In general, if you expect to owe a significant amount of taxes at the end of the year and you don't have withholdings to cover that amount, you'll likely need to make estimated tax payments. This typically applies to:
- Independent contractors and self-employed workers (1099).
- Owners of LLCs, S-Corps, or businesses that receive profits directly from the business.
- Any business with variable income that does not go through a traditional payroll.
The exact amounts, deadlines, and thresholds are defined by the IRS and may change — we review that on a case-by-case basis with each business, because it depends on your income, your structure, and your history from the previous year.
What happens if you don't do them?
If you don't pay during the year, you don't "get away with it"—you simply postpone the payment, and in many cases, the IRS adds an extra charge for late payment. It's a double whammy: you arrive at tax season with a larger bill than you expected, and on top of that, you're saddled with an extra charge. That's why many business owners are surprised to find themselves wondering, "Why do I owe so much if my business wasn't that good this year?"—it's almost always because they weren't making payments during the year.
How do I know how much to pay?
This is where planning comes in. It's not about guessing a number—it's about looking at your actual business income and expenses, projecting how the year is shaping up, and calculating a reasonable estimate quarter by quarter. A business that keeps its books up-to-date throughout the year has a huge advantage here: the numbers are already organized, so calculating the estimated payout isn't guessing, it's simply reviewing them.
If you're unsure whether to make estimated payments, or simply want to stop feeling like taxes catch you off guard every year, Concord Tax Solutions helps you organize your finances and plan year-round—not just in April. Contact us and we'll review it together.
Concord Tax Solutions | 427 Church St N, Concord, NC 28025 | 704-707-3879 | cts@concordtaxsolutions.com
