Quarterly estimated taxes, explained for first-year founders

Nobody withholds taxes from your startup income. That's now your job, four times a year.

When you had a W-2 job, your employer quietly sent taxes to the IRS every paycheck. When you work for yourself, nobody does that. The IRS still expects to be paid as you go, so you send estimated payments four times a year.

The dates

For most people, federal estimates are due:

Payment	Covers income from	Due
Q1	Jan 1 – Mar 31	April 15
Q2	Apr 1 – May 31	June 15
Q3	Jun 1 – Aug 31	September 15
Q4	Sep 1 – Dec 31	January 15 (next year)

Yes, the “quarters” are uneven. No, we don’t know why either. If a date lands on a weekend or holiday, it moves to the next business day.

How much to pay

You have two common ways to stay out of penalty territory:

Pay based on last year. If your estimates add up to at least 100% of last year’s total tax (110% if your adjusted gross income was over $150,000), you’re generally protected from underpayment penalties, even if you make way more this year.
Pay based on this year. Pay at least 90% of what you’ll actually owe for the current year.

Option 1 is easier because you already know the number. Option 2 makes more sense when this year is going to be a lot smaller than last year.

The first-year trap

Your first profitable year is when founders get burned. You didn’t owe much last year, so the safe harbor is tiny, and you feel fine. Then April arrives with the full bill for a great year, all at once.

The fix is boring: set aside a percentage of every payment you receive in a separate savings account. Then pay your estimates from that account.

Don’t forget your state

Most states with an income tax have their own estimated payment rules, with their own dates and thresholds. Check yours, or ask us.

If you’re a TEO client, we calculate your estimates and post a reminder in your Slack channel before each due date. You’ll still have to click “pay,” but that’s the fun part.