Ask any solopreneur what intimidated them most about self-employment (or has kept them from pursuing self-employment altogether) and the vast majority will say this: taxes.
Cringe. Groan. Eye roll.
When you work for yourself, your taxes aren’t automatically withheld from your paycheck the way they are when you’re a traditional employee. That means you’re responsible for paying them yourself by sending in your estimated tax payments correctly and on time.
Sound daunting? The good news is that managing your taxes as a freelancer or solopreneur doesn't need to be a major hurdle or a headache. This simple guide covers what you need to know.
S Corp quarterly taxes work differently from other business structures, making them an attractive option for many solopreneurs. Understanding these differences is crucial for properly managing your tax obligations throughout the year.
One of the biggest benefits of electing S Corp status as a solopreneur is how you can structure your compensation to potentially reduce self-employment taxes. As an S Corp owner-employee, you can receive money from your business in two ways:
Reasonable Salary (W-2 Wages): As an active business owner, you must pay yourself a reasonable salary subject to payroll taxes (Social Security and Medicare). Your S Corp withholds these taxes and sends them to the IRS, just like any other employer would.
Distributions: Any profits still available beyond your salary can be taken as distributions. These distributions or any profits not taken as distributions are not subject to self-employment taxes, which can result in significant tax savings compared to a sole proprietorship. However, you'll still owe income tax on these amounts.
This salary-distribution split affects your quarterly taxes because you may need to make estimated payments on the portion of your income not taken as salary, especially if your salary withholdings don't cover your total tax liability.
S Corporations are "pass-through" entities, meaning the business doesn't pay corporate income tax. Instead, profits and losses pass through to you as the owner via Schedule K-1 forms.
What This Means for Your Solo Business: Your K-1 reports your share of the S Corp's income, deductions, credits, and other tax items. This includes your business profits, regardless of whether you actually took distributions.
Impact on Quarterly Payments: The income shown on your K-1 flows to your personal tax return (Form 1040), and you're responsible for paying taxes on this amount. Since S Corp profits aren't subject to withholding like your salary, you'll typically need to make quarterly tax payments using Form 1040-ES to cover the tax liability on these pass-through earnings.
This is why many solopreneur S Corp owners find themselves making estimated payments with Form 1040-ES even when they receive regular W-2 paychecks from their own business — the withholdings from their salary often aren't enough to cover taxes on the full K-1 income and salary.
Calculating your quarterly taxes requires understanding how much you'll owe on both your salary and business profits. Since your salary already has taxes withheld, you'll primarily focus on estimating the tax liability from your S Corp's pass-through income that appears on your Schedule K-1.
The general recommendation for S Corp owners, specifically freelancers and other self-employed individuals, is to set aside approximately 25-30% of your business profits (beyond your salary) for taxes. You’d pay 22-24% for federal income tax and 3-6% for state income tax, depending on your tax bracket and state.
Let's say your S Corp generated $60,000 in profits during the first quarter, and you paid yourself a $24,000 salary (40% of profits) with proper tax withholdings. The remaining $36,000 in profits would be subject to federal and state taxes, so you'd set aside:
Seems like an eye-popping number? It can be — which is why it’s crucial to prioritize setting aside money for these estimated tax payments (or have Lettuce do it for you automatically). Otherwise, you can be hit with a nasty surprise.
Keep in mind that those percentages aren’t a hard and fast rule, and your tax obligation can differ depending on several factors. If you want to get more specific, a tax obligation calculator can help you determine exactly how much you owe. Here are a few recommended calculators:
You’ll input specific digits from your business and get a far more personalized recommendation for how much to pay in quarterly taxes.
Want to skip the math and guesswork? Lettuce can put your quarterly estimated taxes on autopilot by proactively setting aside money and making your payments each month for you all year long.
Understanding quarterly tax deadlines is crucial for staying compliant and avoiding penalties. Your quarterly taxes follow a specific schedule throughout the year, with payments due every quarter.
The quarterly tax payment deadlines for 2025 are:
In general, quarterly tax payments are due on the 15th of every April, June, September, and January. However, if the 15th falls on a weekend or holiday, the deadline is pushed to the next business day.
It's important to note that these are separate from your S Corp's annual tax return deadline. Your S Corp must file Form 1120S by March 15, 2026 (or request an extension), but your quarterly estimated payments follow the schedule above throughout the year.
Once you've calculated your quarterly taxes, you have several convenient payment options to submit your estimated payments to the IRS and your state tax agency.
Electronic Federal Tax Payment System (EFTPS): This is the IRS's free online system for making tax payments. You can set up an account at eftps.gov and schedule your quarterly tax payments in advance. EFTPS allows you to pay directly from your bank account and provides confirmation receipts for your records.
IRS Direct Pay: Available at irs.gov/payments, this free service lets you pay directly from your checking or savings account. You'll need your Social Security number, date of birth, filing status, and the prior-year tax amount from your return.
Online Payment Processors: Third-party services like Pay1040.com or OfficialPayments.com accept credit cards and debit cards for tax payments, though they typically charge processing fees.
Form 1040-ES Payment Vouchers: If you prefer mailing payments, use the vouchers included with Form 1040-ES. Write a check or money order payable to "United States Treasury" and include the appropriate quarterly voucher. Mail payments early to ensure they're postmarked by the deadline.
Phone Payments: Call 1-888-PAY-1040 to pay by phone using your bank account or credit card. Automated phone payments are available 24/7, though credit card payments incur processing fees.
State payment methods vary, but most states offer similar options to the IRS. Check your state's department of revenue website for specific instructions and forms. Many states have their own electronic payment systems that are similar to EFTPS.
Knowing the above basics will make estimated tax payments way less daunting, but here are a few more tips to keep in mind to help you pay the right amount on time every quarter.
Maintaining accurate and complete financial records is essential for calculating your quarterly taxes. Effective bookkeeping will help you track your business income, salary payments, and distributions throughout the year. This data allows you to extrapolate earnings based on previous quarters and growth trends, helping you project more accurate numbers for your estimated tax payments.
Don't treat your quarterly taxes like surprise bills. Since you know the payment dates each year (April, June, September, and January), plan accordingly by setting aside money each month for your next quarterly payment. Consider opening a separate savings account specifically for tax payments to avoid accidentally spending money earmarked for the IRS.
As an S Corp owner receiving a salary, you can adjust the withholding on your W-2 paychecks to cover more of your total tax liability. If you increase your salary withholdings enough, you may be able to reduce or eliminate your quarterly estimated payments. The IRS even encourages this strategy, recommending adding extra withholding on your W-4 form.
Maximize your tax savings by properly tracking and claiming all legitimate business expenses. Deductions reduce your taxable income, which directly lowers your quarterly tax obligation. Keep detailed records of business meals, travel, equipment, software subscriptions, and other deductible expenses throughout the year.
Don't wait until the quarterly deadline to start calculating your quarterly taxes. Begin your calculations at least a week before the due date to ensure you have time to gather necessary documents, double-check your math, and submit payments on time. If you're mailing payments, remember they must be postmarked by the deadline.
Your income may fluctuate throughout the year, so review your quarterly tax payments each quarter and adjust as needed. If your business is performing better or worse than expected, recalculate your estimated payments to avoid significant underpayments or overpayments at year-end.
Even with all of the information and calculators, managing your quarterly tax payments can still be challenging — especially with irregular income and complex deductions that come along with being a business-of-one.
The good news is that you don’t need to go it alone. Lettuce can take the pain out of the quarterly tax process with:
And that’s just a sampling of what Lettuce can do for your solo business. From answering your tax-related questions to preparing your annual filings, think of Lettuce as having your own, always-on accountant.
Here's an FAQ section for the end of the article:
Overpaying your quarterly taxes isn't necessarily better, but it's often safer than underpaying. If you overpay, you'll receive a refund when you file your annual tax return, essentially giving the government an interest-free loan. However, overpaying protects you from underpayment penalties and ensures you're compliant. Many S Corp owners prefer to slightly overpay for peace of mind, especially when income is unpredictable.
The IRS imposes penalties if you owe $1,000 or more in taxes and haven't paid at least 90% of the current year's tax liability or 100% or 110% (depending on your income) of last year's tax liability through quarterly payments and withholdings. The penalty is typically 5% of the underpayment amount and can reach as high as 25%. The IRS also charges interest on underpayments based on current market rates.
S Corp quarterly taxes aren't due exactly every three months. The payment schedule is uneven, with deadlines on April 15, June 15, September 15, and January 15. This means the periods between payments vary from 3 to 4 months, with the shortest gap between the first and second quarters (about 2 months).
Even if you're receiving a regular W-2 salary from your S Corp with tax withholdings, you may still need to make quarterly estimated payments. This depends on whether your salary withholdings cover the full tax liability on your total S Corp income, including business profits shown on your K-1. If your business profits significantly exceed your salary, quarterly payments are likely necessary.
Yes, you can adjust your quarterly tax payments throughout the year based on changes in your income. If your business is performing better or worse than expected, recalculate your estimated payments for the remaining quarters. This flexibility helps you avoid significant overpayments or underpayments at year-end.
Missing a quarterly payment deadline can result in penalties and interest charges, even if you're due a refund when you file your annual return. The penalty applies to each missed quarter individually. If you realize you've missed a deadline, make the payment as soon as possible to minimize additional interest charges.
Both strategies can work towards covering your S Corp tax liability. Increasing your W-2 salary withholdings can simplify tax management and potentially eliminate the need for quarterly payments. However, quarterly payments give you more control over cash flow timing. Consider your business's cash flow patterns and personal preference when deciding which approach works better for your situation.
Love them or hate them (we know, you probably hate them), taxes are an important part of being self-employed. But their constant presence doesn’t mean they need to be a constant pain.
With some thoughtful preparation and the right tools, you can transform your estimated tax payments from an overwhelming puzzle to a straightforward routine.
Ready to take the stress out of quarterly tax payments? Put your taxes on autopilot with Lettuce.