Running a small business in Texas comes with a lot of moving parts. Whether you’re managing service calls for your HVAC team, juggling listings as a real estate agent or keeping up with client renewals in your insurance agency, taxes are usually the last thing you want to think about during a busy year. But because your income does not come with automatic withholding the way a W-2 paycheck does, the IRS expects you to pay as you go. That is where estimated taxes come in.
At Adam Traywick, CPA, we spend a lot of time helping Fort Worth by preparing a business owner’s guide to estimated taxes and how to stay ahead of them. When you know what is required and put a simple rhythm in place, you can avoid penalties and protect your cash flow when heading into tax season.
Estimated taxes are quarterly payments that cover your federal income tax and your self-employment tax. Since the U.S. tax system is a pay-as-you-go model, the IRS wants you to make payments during the year instead of waiting until April. That can feel unfamiliar if you came from an employee role where taxes were automatically withheld. But for business owners, contractors, LLCs, S corporations and anyone receiving income without withholding, it is a key part of staying compliant.
If you expect to owe at least $1,000 in federal taxes for the year after subtracting any withholding or credits, you are supposed to make estimated payments.
Understanding this early avoids the biggest issue business owners face: finding out too late that they owed quarterly payments and now owe penalties as well.
One thing that surprises many new business owners is that estimated taxes cover more than just income tax. They also include self-employment tax. This is the tax that funds your Social Security and Medicare contributions. When you were an employee, these amounts were automatically taken out of your paycheck. Now that you are running your own business, you are responsible for paying both the employer and employee portions.
For sole proprietors, single-member LLCs, and partners, this tax can make up a large part of what you owe each quarter. It is based on your net earnings from the business, which means the more profitable you are, the more self-employment tax you may owe. This is one of the biggest reasons quarterly estimated tax planning matters, especially for businesses that may see income fluctuate throughout the year.
If you operate as an S corporation, the rules look a little different. The salary you pay yourself through payroll is subject to Social Security and Medicare withholding, but the remaining profit you take out as distributions is not. Even so, you may still need estimated tax payments to cover the income tax on those distributions.
The IRS sets four due dates each year. These generally fall on April 15, June 15, September 15 and the following January 15. If the 15th lands on a weekend or holiday, it rolls to the next business day. Missing one of these deadlines can trigger a penalty even if you make the payment shortly after.
As Texas has no personal income tax, many business owners forget that federal obligations still apply. If your income varies throughout the year, especially in trades or real estate, these dates can creep up quickly. Adding them to your calendar or setting simple reminders can go a long way toward keeping you on track.
A great first step is reviewing last year’s tax return. Look at your total tax liability, then use that number as a baseline for the coming year. The IRS allows many business owners to use a “prior year” method, which means you simply divide last year’s tax by four and pay that amount each quarter. It is a simple approach that protects most owners from penalties as long as the business has not changed too dramatically.
For trades, real estate, and insurance professionals whose income tends to rise and fall, you may be better off estimating based on what you actually earn during the year. This is known as the annualised income method. If the first few months of the year are slower, for example, your first estimated payment would be lower. If summer or fall is your busiest season, your late payments would rise to match. It is a helpful way to align taxes with your cash flow.
Once you have your numbers, you can make payments through IRS Direct Pay, EFTPS, or by mailing a check with Form 1040-ES. The process is straightforward as long as you give yourself time to prepare instead of rushing at the deadline.
IRS penalties happen when you do not pay enough throughout the year, even if things look fine on paper at tax time. The IRS generally expects you to pay at least 90% of your total tax for the current year or 100% of what you owed last year. High earners may need to meet a slightly higher threshold.
Penalties often happen when owners underestimate income, forget a deadline or assume they can “catch up later.” Unfortunately, the IRS does not see late payments and catch-up payments the same way. The good news is that with a little planning, penalties are easy to avoid. The key is consistency.
The most effective approach is not complicated. It is about creating a steady rhythm so your tax planning feels predictable rather than stressful. At Adam Traywick, CPA, we help clients map out the year so their payments match what the business is actually doing. We review your earnings each quarter, update your estimates, look at upcoming deductions, and help you set aside what you need before deadlines arrive.
For trades and real estate, this rhythm can make a huge difference in your cash flow. Instead of scrambling to cover a large unexpected bill, you’re distributing those payments gradually in line with your income.
If you want your estimated tax payments to feel organised and manageable, our Fort Worth team is here to help you understand your numbers and build a plan that works for the way your business actually operates.
Book a call with us. Let’s make tax season stress-free and more predictable together.
