Quarterly Tax Calculator: How Much to Set Aside for Q4

How the safe harbor works

The IRS does not require you to predict your income perfectly. It requires you to pay in, through the year, the lesser of two amounts: 90% of what you will actually owe this year, or 100% of what you owed last year (110% if your prior-year adjusted gross income was over $150,000). Hit either number through quarterly payments and withholding, and there is no underpayment penalty, even if your final bill is much larger.

That is why last year's tax return is the most useful input in the calculator. In a growth year, the prior-year safe harbor is usually the smaller number: you pay quarterly against last year's smaller tax, keep the difference working for you all year, and settle the remainder at filing without penalty.

The Q2 trap

The quarters are not even. Q2 covers only April and May, two months of income, but the payment is still a full quarter of the annual amount if you pay in equal installments. Most penalty letters we see trace back to a missed or short June payment.

When the number feels too big

If the quarterly figure is uncomfortable, the answer is usually not to skip payments; the penalty is an interest charge that accrues daily. The answer is to shrink the tax itself. For most self-employed people clearing six figures, an S-corp election is the single largest lever.