How to Estimate Taxes in 2025 for Small Business Owners

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If you’re self-employed or earn income without tax withholding, the IRS expects you to make estimated payments throughout the year, not just at tax time. Missing a deadline could cause you costly penalties and interest. 

In this episode, we cover everything you need to know about estimating and paying taxes; Who needs to pay, when it's due, and how to avoid IRS penalties.

Chapters:

00:00 The IRS Won’t Wait: Estimated taxes apply to income without withholding, like self-employment, rentals, and investments. If you don’t pay throughout the year, you could face major penalties.

01:09 What Income Requires Estimated Payments: Self-employed earnings, K-1s, rental income, capital gains, and interest or dividends.

03:02 Pay As You Earn Explained: The U.S. requires you to pay taxes as you earn income. W-2 employees have taxes taken out automatically, but business owners have to do it themselves.

05:43 Estimated Tax Deadlines: IRS quarterly deadlines: Q1 due April 15, Q2 due June 15, Q3 due September 15, Q4 due January 15 (of the following year)

08:42 Don’t Forget State Estimated Payments: State income taxes may also require estimated payments. Deadlines and rules vary, so check your state’s tax agency website.

08:58 IRS Safe Harbor Rule: Avoid penalties by either paying 100% of last year’s taxes (110% if you made over $150K) or paying 90% of what you’ll owe this year.

11:37 How to Estimate and Pay: Steps to estimate your income, calculate tax, divide it quarterly, and make timely payments using IRS Direct Pay or your state’s website.

12:15 Penalties and Interest for Missing Payments: Missing payments can trigger a 0.5 percent monthly penalty (up to 25 percent) and 3 to 8 percent interest based on short-term federal rates.

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Podcast Host: Mike Jesowshek, CPA - Founder and Host of Small Business Tax Savings Podcast

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🎙 ABOUT THE PODCAST

The Small Business Tax Savings Podcast is your go-to resource for cutting-edge tax strategies designed to help entrepreneurs and small business owners legally slash their tax bills. Hosted by Mike Jesowshek, CPA, this podcast breaks down complex tax topics into clear, actionable, no fluff insights, so you can maximize your savings and keep more of your hard-earned money.