Quarterly Taxes: The Payments Nobody Warned You About

April of 2018, I got a call from a guy who’d just launched a consulting business in Midtown. He told me he owed $23,400 in federal taxes and didn’t have it. The money was in his business. He’d been careful with bookkeeping, put money back into the company, thought he’d be fine come tax season.

He’d never made a quarterly estimated tax payment.

That’s the conversation that sticks with me most in twenty-three years doing this. Not because he was careless. He wasn’t. He just didn’t know the IRS expects self-employed people to pay taxes as they go, not wait until April.

I’m writing this so your April doesn’t look like his did.

Why Quarterly Taxes Exist

You’re employed somewhere. Every paycheck, your company pulls out federal withholding. You don’t think about it. Money goes in, a chunk goes to taxes, the rest hits your account. By April, you’ve been paying all year.

You go into business for yourself. Now you get the full check. The IRS isn’t sitting there with their hand out anymore. It’s on you to send in quarterly estimated payments. If you don’t, they charge penalties when April finally arrives. That’s a hit on top of the tax you already owe.

Quarterly estimated taxes are how the IRS makes sure business owners and self-employed people aren’t just holding all their tax money until they feel like sending it in.

Do You Need to Pay Quarterly?

I get this question a lot from business owners across Houston. Sugar Land, Memorial, Energy Corridor. The answer depends on your situation.

You need quarterly payments if you’re self-employed. That’s sole proprietor, single-member LLC, freelancer, consultant. If you own a business that files its own return and passes profit to you personally, you need them. You get 1099 work. You have rental property or investment income. Any of these apply and you need to make quarterly payments.

The $1,000 Rule

The IRS keeps it simple here. You owe estimated tax if you expect to owe $1,000 or more in federal taxes after you subtract any W-2 withholding and tax credits.

If you’re making $60,000 or more from self-employment, you’re crossing that threshold. No question about it.

2025-2026 Due Dates

Quarter	Income Period	Due Date
Q1	January 1 - March 31	April 15, 2025
Q2	April 1 - May 31	June 16, 2025
Q3	June 1 - August 31	September 15, 2025
Q4	September 1 - December 31	January 15, 2026

See the pattern? Q2 is only two months. Q3 is three. Q1 and Q4 are three each. This confuses people all the time. Put these dates in your phone calendar with alerts right now.

If the due date falls on a Saturday, Sunday, or federal holiday, you get the next business day. But don’t count on that to save you. It happens rarely enough that you should plan for the listed date.

How to Calculate Your Payments

I work through two methods with my clients. Pick the one that fits your situation.

Method 1: Current Year Estimate

You look at what you expect to make this year, calculate your tax bill, divide by four.

I had a graphic designer in Bellaire come through last year. She expected to net $78,000 from her business. Here’s what we calculated:

Annual net profit: $78,000. Self-employment tax (15.3% on 92.35%): $11,031. Federal income tax (around 15% effective): $11,700. Total: $22,731. Quarterly payment: $5,683.

This works when your income is steady. Month to month, you know what’s coming.

Method 2: Safe Harbor

You take what you paid in total federal tax last year, split it into four quarterly payments. No surprises. No penalties.

The twist: If your adjusted gross income last year was over $150,000 (or $75,000 if married filing separately), you pay 110% of last year’s tax instead of 100%.

I had a consultant in the Energy Corridor use this method. His total tax bill last year was $19,200. His AGI was $165,000, so it triggered the 110% rule.

Last year’s total tax: $19,200. 110% amount: $19,200 x 1.10 = $21,120. Quarterly payment: $5,280.

Which Should You Use?

Go with current year estimates if this year’s income will be noticeably lower than last year or if your monthly income is consistent and predictable. Use safe harbor if your income bounces around, you want to keep the math simple, or you think this year will beat last year. Safe harbor also protects you from penalties even if your income explodes.

The Self-Employment Tax Reality

This part surprises people every time I explain it.

You work at a company. They pull 7.65% for Social Security and Medicare from your paycheck. They turn around and pay another 7.65% on your behalf. Total flowing to the government is 15.3% of your wages.

You work for yourself. Nobody’s there to pay half. You pay both sides. 15.3% in self-employment tax.

The 2025 rates break down like this:

Social Security: 12.4% on net earnings up to $176,100. Medicare: 2.9% on all net earnings. Additional Medicare tax: 0.9% on anything over $200,000 (single) or $250,000 (married).

Here’s the catch most people miss. Self-employment tax isn’t calculated on your full net income. It’s 92.35% of your net self-employment earnings. That adjustment accounts for the employer portion you’re deducting.

Say a business owner in River Oaks nets $100,000 from their self-employment income:

SE tax base: $100,000 x 0.9235 = $92,350. SE tax at 15.3%: $92,350 x 0.153 = $14,130.

That’s $14,130 before federal income tax even shows up. Income tax comes straight on top of that.

How to Make Payments

IRS Direct Pay (My Preference)

Go to irs.gov/payments. Free, secure, you get confirmation instantly. Select “Estimated Tax” as the reason, put it against form 1040ES, enter the tax year, and you’re done. Takes about ten minutes.

EFTPS

Electronic Federal Tax Payment System at eftps.gov. Takes five to seven days to get approved after you sign up, but once you’re in, you can schedule all four quarterly payments at once and then forget about them for the year.

IRS2Go Mobile App

They have an app that connects to Direct Pay. You can make payments from your phone if you’re set up to do that.

Credit or Debit Card

You can pay through processors the IRS approves. They charge processing fees on top: roughly 1.85% to 1.98% for credit cards, flat dollars for debit. Only use this if the points or rewards you get back are worth more than the fee.

Underpayment Penalties

Miss quarterly payments and the IRS adds a penalty on top of what you already owe. For 2025, that’s sitting around 8%, though it shifts with interest rate changes.

How to Avoid Penalties

You sidestep the penalty if any of these apply:

You owe less than $1,000 total after withholding and credits. No payment required.

You paid at least 90% of this year’s actual tax through quarterly estimates and withholding.

You paid at least 100% of last year’s total tax. 110% if your AGI last year was over $150,000.

Safe harbor is your safest move. Pay what you paid last year (or 110% if you’re over the threshold), and penalties don’t apply regardless of what your income does.

Texas Considerations

The good news: Texas doesn’t have state income tax. You’re not sending quarterly payments to the state.

The reality: If your business operates in other states that do tax income, you probably owe estimated payments there too. If you have employees in states like Arkansas or Oklahoma, if you’re selling to California, if you have rental property in Colorado, each one has its own rules. Some require quarterly, some require annually. None of them match federal. It gets messy fast.

Common Mistakes

Mistake 1: Waiting Until Year-End

I see owners skip quarterly payments entirely and try to pay everything in April. Penalties hit for every quarter you underpaid. It multiplies the pain.

Mistake 2: Missing Q4

Q4 payment is due January 15 of the next year, before you file your return. People get caught up in gathering tax documents and blow right past it. Then they’re calling me in February looking to amend.

Mistake 3: Not Adjusting When Income Changes

Business explodes mid-year. Your first half quarterly payments are now way too low. You need to bump up your remaining payments to stay ahead. Safe harbor keeps you from penalties, but you still owe the money.

Mistake 4: Confusing Profit with Cash

You owe tax on your net profit, not the gross money coming in. If you moved $50,000 through your business account but spent $40,000 on expenses, you owe tax on $10,000 of profit. Not $50,000. You need clean bookkeeping to know the real number. Guessing is exactly how you end up with a shock like my Midtown client did.

The System That Works

Every new business owner gets the same talk from me:

Monthly: When you calculate your profit, immediately move 25% to 35% of it into a separate savings account. Don’t spend it. Don’t reinvest it. Leave it there.

Quarterly: When a quarterly payment is due, the money is already in that savings account waiting. You transfer it to the IRS and move forward.

Annually: We sit down, calculate what you actually made, and figure out next year’s estimate. You adjust based on reality.

This is the whole system. Money you set aside as you earn it is money that exists when payment is due. That’s the only thing that stops the April panic call.

Getting Help

The math gets complicated when you’ve got multiple income streams, state tax exposure, seasonal income, loss carryforwards, or you’re running as an S-Corp and need to split salary versus distributions the right way.

I work with business owners across Houston to lock down what they’ll owe and make sure quarterly payments hit the mark. Clean bookkeeping all year is what makes the numbers real instead of a gamble.

If you need help figuring out your quarterly tax strategy, contact us and we’ll walk through your specific situation.

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This article provides general information and is not tax advice. Tax situations vary, and you should consult with a qualified tax professional about your specific circumstances.