A quick guide to estimated taxes

Every April 15, something a little strange happens. You file your 2025 taxes — and your CPA hands you a voucher to pay toward your 2026 taxes on the same day. Two tax bills, one deadline, zero explanation. If that's ever made you feel like the tax system is just making things up as it goes, you're not alone.

Here's what's actually going on.

What are estimated taxes?

If you're a salaried employee, taxes come out of every paycheck automatically. When you own a business, there's no one doing that for you. Estimated taxes are how the IRS collects throughout the year on income that isn't subject to withholding — think of it as the DIY version of a paycheck deduction, paid quarterly.

Do you need to pay them?

If your business is profitable and you're not running that income through a formal salary, you probably owe taxes. If you don’t pay “enough” of your tax bill via quarterly payments, the IRS will charge you a “penalty” that is really just interest on the amount you should have paid.

If you don’t pay in full by the following April 15, the penalties are a lot more significant so whether or not you make those quarterly payments, make sure to set aside enough money to pay the full bill come April 15.

How much?

You will be charged interest if you end up owing taxes in April and you didn’t pay at least 110% of last year's tax bill, or 90% of this year’s actual tax bill. Those vouchers your CPA sent are typically designed to get you to that 110% number.

One thing to watch

Those vouchers protect you from quarterly penalties — but they're based on last year's numbers. If 2026 turns out to be a stronger year, you could still face a larger bill in April even if you paid on time. It's worth a check-in as the year goes on, not just at tax time.