What Saving for Estimated Taxes Actually Means for Small Business Owners
If you are self employed or run a small business, you have probably heard this phrase more times than you can count:
“Make sure you are setting aside money for estimated taxes.”
Helpful advice. Also incredibly vague.
Most business owners are not confused because they are bad with money. They are stressed because no one ever explains what setting aside money actually looks like in real life. So let’s break it down in plain English.
I work with small business owners who want fewer tax surprises and more clarity around their quarterly tax payments.
What Are Estimated Taxes?
Estimated taxes are quarterly tax payments made to the IRS (and often your state) when you do not have taxes withheld from a paycheck.
This usually applies if you are:
Self employed
A single member LLC
A partner in a partnership
An S corp owner receiving pass through income
Instead of paying all your taxes in April, the IRS expects you to pay as you earn income throughout the year.
What Your Tax Accountant Really Means When They Say “Set Aside Money”
Setting aside money for estimated taxes is not about guessing or crossing your fingers at tax time. It comes down to three very specific actions.
1. Calculate a Portion of Your Net Profit
This is not based on your total revenue. It is based on your net profit, meaning income minus business expenses.
For many small business owners, a safe starting range is setting aside 20 to 35 percent of net profit. The exact percentage depends on:
Your federal tax bracket
State taxes
Self employment tax
Other household income
This is why one size fits all advice rarely works. Your numbers matter.
2. Park the Money Somewhere You Will Not Spend It
The biggest mistake I see is leaving tax money in the main business checking account. It feels available, so it gets spent.
A separate tax savings account solves this problem fast.
Every time you pay yourself or close out the month, move the tax portion into that account. Out of sight really does help here.
This is not about restriction. It is about clarity.
3. Make Your Quarterly Payments on Time
Estimated tax payments are generally due:
April
June
September
January
Missing or underpaying these can lead to penalties and interest, even if you eventually pay your taxes in full.
The IRS cares about timing, not just totals.
What Is the Safe Harbor Rule and Why It Matters
The safe harbor rule is what helps you avoid underpayment penalties.
In simple terms, you are usually protected if you pay in:
100 percent of last year’s total tax liability (or 110 percent for higher income earners), or
90 percent of your current year tax liability
This is where working with a tax professional makes a real difference. Guessing wrong here can cost you money.
Why Estimated Taxes Feel So Stressful
Most stress around estimated taxes comes from uncertainty, not the payments themselves.
Business owners worry about:
Paying too much and hurting cash flow
Paying too little and getting penalized
Not knowing what number to trust
All of that is avoidable with proper planning.
How We Help at Thrasher CPA, LLC
When you work with Thrasher CPA, LLC, you are not left guessing.
We provide our clients with estimated tax payment vouchers that show exactly how much to pay each quarter. No vague percentages. No scrambling at deadlines.
The goal is simple:
Avoid penalties
Reduce stress
Help you feel confident about your numbers all year long
Estimated taxes do not have to be overwhelming. They just need to be intentional.
Final Thoughts
Setting aside money for estimated taxes is not about perfection. It is about consistency and clarity.
Know your number.
Separate the cash.
Pay quarterly.
That is it.
If estimated taxes are a constant source of anxiety for you, it may be time for a more proactive tax plan instead of reacting every April.
Tired of guessing what to pay in estimated taxes?
If you are a small business owner who wants clarity around quarterly tax payments and fewer surprises at tax time, this is exactly what I help clients with.
At Thrasher CPA, LLC, my clients receive clear estimated tax guidance and payment vouchers so they know exactly what to pay and when.
👉 Schedule a consultation to see if we are a good fit.