Glossary
Estimated taxes
Quarterly prepayments of federal (and state) income and self-employment tax by people whose income is not subject to withholding, due April 15, June 15, September 15 and January 15.
Business owners have no employer withholding tax for them, so the IRS expects four payments through the year. Underpay and a penalty runs from each due date at roughly the rate of interest. The safe harbour: pay at least 100% of last year's tax (110% if last year's income was over $150,000) in four equal instalments and no penalty applies, however good this year turns out.
S-corp owners can cover the year through payroll withholding instead, which is treated as paid evenly across the year even if it all happened in December.
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