If you're running your own business, you're wearing enough hats, and with Q3 estimated taxes due September 15, the IRS expects you to calculate and pay without reminders.

And guessing? That's an expensive strategy.

Here's what goes wrong:

• Some business owners overpay out of caution, tying up thousands that could be reinvested in the business.
• Others underpay and end up getting hit with penalties and 7%+ IRS interest.

The smarter choice is calculating with confidence. When you know exactly what to pay, you stay compliant while keeping more cash in your business.
‍

Tax Deadlines You Need to Know:

• Q1 (Jan-Mar): April 15, 2025
• Q2 (Apr-Jun): June 16, 2025
• Q3 (Jul-Sep): September 15, 2025 (current due date)
• Q4 (Oct-Dec): January 15, 2026

Miss these dates and you'll owe the IRS interest and penalties.
‍

Three Methods to Calculate Your Payment

1. Safe Harbor (Most Common, Not Always the Best)

Pay 100% of last year's total tax (110% if your adjusted gross income exceeded $150,000) or 90% of this year's estimated taxes.

Best if: Your income is steady year to year and you want the simplest option.

Downside: You might significantly overpay if 2025 income is lower.
‍

2. Annualized Income Method (Best for Seasonal Businesses)

Calculate and pay based on your actual income earned each quarter.

Best if: You have seasonal income patterns and want the most precise method.

Downside: Requires more detailed tracking and additional forms (Form 2210).
‍

3. Current Year Estimate (Requires Good Books)

Estimate your total 2025 income, deductions, and credits to determine the right quarterly amount.

Best if: Your income significantly differs year to year and you want to preserve cash flow.

Downside: Requires accurate bookkeeping and forecasting, but is the most balanced and cost-effective method.

At Better Bookkeeping, we use this method for all clients. Yes, it requires more detailed tracking, but clients save thousands by not overpaying during slow periods while getting more accurate tax liability tracking month by month.
‍

The S-Corp Advantage

Unlike sole proprietors who pay self-employment tax on all business income, S-Corp owners only pay payroll taxes on their reasonable salary. Distributions above that salary avoid the 15.3% self-employment tax.

Many S-Corp owners find they can lower their quarterly payments by adjusting the ratio of salary to distributions, though this requires careful planning to ensure your salary meets IRS reasonable compensation requirements. 

The key is working with your bookkeeper or tax professional throughout the year to ensure compliance and adjust strategy as needed.
‍

How to Make Your Q3 Payment

You have three options for completing quarterly tax payments:

• IRS Electronic Federal Tax Payment System (EFTPS): Schedule payments up to a year in advance
• IRS Direct Pay: Quick payment without registration required
• Mail a check with Form 1040-ES payment voucher: This option is still accepted for 2025, but the IRS is phasing out mail-in payments and delays/lost mail are a growing concern

Avoid the 7% Penalty

The IRS currently charges interest (about 7%) on underpaid estimated taxes. Avoid this by:

• Ensuring your total tax due at year-end is under $1,000 after credits and withholdings
• Making accurate and on-time quarterly payments
  
  

Pro Tips

• Set aside 25–30% of your income in a dedicated tax savings account each month
• Adjust estimated payments based on seasonal income variation
• Don’t wait until Q4, consider a mid-year tax planning session
• Let your bookkeeping drive your estimates - timely, accurate books are key
  ‍

The Bottom Line

Estimated taxes aren’t about guessing, they’re about strategy and alignment.

Overpaying ties up funds. Underpaying leads to penalties. With the right calculation method and accurate financials, you can stay compliant and maximize your cash flow.

Need help calculating your Q3 taxes or improving your tracking system?

Better Bookkeeping helps small business owners make smart, compliant tax payments with real-time visibility into what they owe.

‍