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TaxesJune 24, 2025 · 4 min read
How estimated taxes actually work
Four payments a year, based on income you have not finished earning. Here is how to size them without overpaying.
Who owes them If you expect to owe $1,000 or more when you file, the IRS wants the money during the year, in four installments.
Two ways to size the payment - Safe harbor: pay 100% of last year's tax (110% at higher incomes) and penalties are off the table. - Current-year projection: better for a business that is growing or shrinking fast, because you pay on this year's reality.
Do not forget the state California and most other states run their own schedule and their own percentages. Paying only the federal side is one of the most common surprises we see.
In our plans Growth and above include estimated tax payment scheduling, and Strategic and All-Inclusive add projections so the number is based on this year, not last year.
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Our monthly plans include the deadlines, filings and reminders in this article.