Quarterly Estimates

If you’re self-employed, you’re generally required to pay your taxes four times a year in “estimated” payments, rather than in one lump sum. The reason it’s called “estimated” is because you’re estimating how much income you’ll make within the year, and paying taxes on that amount.
You generally need to make estimated quarterly tax payments if you have the following minimum expected tax obligation at the end of the tax year:
  • Sole proprietor $1,000
  • A partner in a partnership $1,000
  • A shareholder in an S-Corporation $1,000
  • C-Corporation $500
If you did not owe any taxes in the previous tax year and did not have to file a tax return, you don’t need to file quarterly estimated taxes! For example: if you started your business in 2019, and therefore didn’t file taxes last year, you are not obligated to file quarterly estimated taxes in 2020.
Pro Template for Quarterly Estimated Tax Payment
Please use the following template when reaching out to clients about Quarterly Estimated Tax Payments: Hi *client name*, for your quarterly estimated tax payments we have two options: I can provide you with vouchers for you to pay online quarterly or mail quarterly, or I can set up automatic withdrawals for you. Automatic payments are convenient, but if your financials change throughout the year you won’t be able to change them or get a rebate until next year’s filing. You can read more about quarterly estimates here https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes. Please let me know which option you prefer and if you have any questions!

Safe Harbour Rule

Paying 100% of the taxes you owed in the previous year is sometimes referred to as the safe harbor rule. Even if your income grew this year, you will avoid penalties if you match the payments that you owed in the previous year (but you will still have to make up the additional tax payments).
One important caveat—if your income is more than $150,000 per year, then you’re required to pay 110% of what you paid in taxes last year.
BenchTax uses Safe Harbor Rules.
For any client that purchases their 2019 annual taxes with BenchTax, you will receive 2020 quarterly estimated tax remittances prepared along with the amount owing each quarter to the IRS. BenchTax will not file these quarterly remittances on your behalf; it is your responsibility to remit payment by each quarterly deadline. Typical quarterly deadlines are listed below:
  • For the period Jan 1 to March 31: April 15
  • For the period April 1 to May 31: June 15
  • For the period June 1 to August 31: September 15
  • For the period September 1 to December 31: January 15 of the following year