If you’re self-employed, own a business, or earn income outside of a W-2 job, estimated tax payments are a critical part of staying in good standing with the IRS. But many taxpayers miss deadlines, miscalculate their payments, or overlook important planning strategies—resulting in unexpected penalties, interest charges, or cash flow issues.

At Milestone Certified Public Accountants Inc., we help clients understand how to stay compliant, avoid underpayment penalties, and build proactive tax strategies that support year-round financial health.

Let’s break it down.

What Are Estimated Tax Payments?

Estimated taxes are quarterly payments made to the IRS (and often your state) on income not subject to withholding, such as:

• • Self-employment income

• • Rental income

• • Interest, dividends, capital gains

• • Earnings from S-corp or partnership K-1

• • Freelance, 1099, or gig income

You must make these payments in real-time throughout the year—not just at tax filing time.

2025 IRS Estimated Tax Deadlines

Note: If the due date falls on a weekend or holiday, the deadline moves to the next business day.

Why Estimated Tax Payments Matter

If you underpay or skip payments, you may face:

• • State-level penalties in California and other states

• • IRS underpayment penalties

• • Interest on unpaid amounts

• • A surprise tax bill at filing time

Safe Harbor Rules: How to Avoid Penalties

To avoid IRS penalties, make sure your estimated payments meet one of these safe harbor thresholds:

1. 1. 90% of your current year tax liability, or

1. 1. 100% of your prior year tax liability
      

       

      • • (110% if AGI was over $150,000 in prior year)

Example: If you owed $20,000 in taxes last year and your AGI was over $150,000, you should pay at least $22,000 in estimated payments this year to stay safe.

How to Calculate Your Estimated Taxes

Use IRS Form 1040-ES or work with your CPA to calculate:

• • Total expected income

• • Adjustments and deductions

• • Taxable income

• • Tax owed (using current IRS brackets)

• • Credits and payments made

• • Quarterly payment amount

We recommend setting aside 25-30% of net income if you’re self-employed or 1099-based, depending on your income level and location.

Planning Tips to Stay Ahead

1. 1. Use a separate savings account for tax withholding

1. 1. Pay early or monthly to manage cash flow

1. 1. Adjust payments if your income changes mid-year

1. 1. Track income and expenses in real time with bookkeeping

1. 1. Schedule quarterly reviews with your CPA

California Estimated Tax Filers (FTB)

If you’re in California, you’ll also need to make state estimated tax payments to the Franchise Tax Board (FTB). These follow a different schedule:

Check California’s FTB site for updates →

How Milestone CPAs Helps You Plan Ahead

At Milestone Certified Public Accountants Inc., we offer:

• • Quarterly Tax Planning & Projections

• • Income Tracking & Forecasting Tools

• • Safe Harbor Tax Calculations

• • Business Structuring to Reduce Tax Liability

• • Entity-specific estimated payment strategies (LLC, S-Corp, C-Corp)

Ready to Ditch the Guesswork?

Schedule a Tax Planning Session →
Let Milestone CPAs help you get ahead of the IRS and take control of your cash flow with smart estimated tax planning.

By Ronak Bhatt, CPA, MBA
Your Partner in Business, Accounting For Your Success

Located in Pleasanton, CA | Serving the Tri-Valley Area
Call us at (925) 320-0309 | Email: ronak@milestonecpas.com | Book Your Schedule Consultation