Running an LLC means no income tax withholding, but don’t forget about those quarterly deadlines on your calendar. Unlike W-2 employees with automatic tax withholding, LLC owners operate under the IRS's "pay-as-you-go" system. That means you estimate and submit both federal income tax and self-employment tax four times annually.
Miss these payments or significantly underpay, and penalties accumulate. This happens even if the IRS ultimately owes you a refund. This guide provides a clear roadmap for calculating, submitting, and avoiding penalties on your quarterly estimated taxes while maintaining compliance.
Step 1: Determine if you must pay quarterly taxes
The IRS requires quarterly estimated tax payments when you expect to owe at least $1,000 in federal tax for the year after subtracting withholding and credits. The IRS spells out this threshold in its estimated-tax FAQ. For most LLCs taxed as pass-through entities, any net profit not covered by W-2 withholding triggers quarterly payments.
You can generally avoid an underpayment penalty if your total payments, through withholding or estimated taxes, hit the Safe Harbor threshold. This means that your combined withholding and estimated payments equal the lesser of:
90 percent of this year's tax bill, or
100 percent of last year's tax (110 percent if last year's adjusted gross income topped $150,000, or $75,000 if married filing separately)
Hit Safe Harbor and you avoid penalties even if your projections miss the mark. New LLCs without a prior return simply target the 90-percent threshold.
Step 2: Identify your LLC's required tax form
Almost every LLC owner pays estimates through Form 1040-ES. The IRS packet includes worksheets, payment vouchers, and due-date reminders. Download it from the IRS site to project annual income, factor in self-employment tax, and break the number into four payments.
Your annual paperwork changes based on IRS classification:
Single-member LLCs operate as sole proprietors, reporting business income on Schedule C with Form 1040 while using 1040-ES for quarterly estimates.
Multi-member LLCs file informational partnership returns on Form 1065, passing income to each partner who pays individual estimates on 1040-ES.
C-corps file Form 1120 and calculate estimates on Form 1120-W, while S-corp shareholders stick with 1040-ES for distributions.
Choose the right annual form based on your classification, but most LLC owners use 1040-ES for quarterly payments throughout the year.
Step 3: Calculate your quarterly payment amount
Open your Form 1040-ES and pull out last year's return. These documents become your foundation for estimating payments.
Start by projecting annual profit: estimate revenue, subtract business expenses, then work through the Self-Employment Tax Worksheet inside Form 1040-ES. The IRS taxes only 92.35% of your net profit with self-employment tax at 15.3% combined (Social Security and Medicare). You can deduct half of this calculation when determining adjusted gross income.
After calculating AGI, subtract either the standard deduction ($14,600 for single filers or $29,200 for married couples filing jointly in 2024) or itemized deductions. This gives you taxable income. Apply current federal brackets to estimate your income-tax bill, then add the self-employment figure. Include any additional taxes like the 0.9% Medicare surtax on wages above $200,000.
Now spread that total across four payment periods. If cash flow stays steady, dividing by four works well. If income concentrates in specific quarters, consider the annualized income method described in Publication 505. This lets you recalculate each quarter based on actual earnings to date, avoiding overpayment early and reducing penalty risk for seasonal businesses.
Keep your math and supporting documents. The IRS requires payments to cover 90% of this year's tax or 100% of last year's bill (110% for high earners). Meeting these thresholds keeps you inside Safe Harbor and clear of underpayment penalties.
Step 4: Submit payments and meet quarterly deadlines
The IRS splits the year into four uneven periods with specific deadlines:
April 15: Income earned January 1–March 31
June 15: Income earned April 1–May 31
September 15: Income earned June 1–August 31
January 15 (following year): Income earned September 1–December 31
When deadlines fall on weekends or federal holidays, they move to the next business day.
Electronic options provide instant confirmation. IRS Direct Pay pulls funds directly from your checking or savings account with no registration. The Electronic Federal Tax Payment System allows advance scheduling once you complete enrollment. The IRS2Go app connects to Direct Pay for mobile payments.
Paper payments still work. Detach the appropriate voucher from Form 1040-ES, write a check to "United States Treasury," and note "2024 Form 1040-ES" plus your Social Security Number on the memo line.
Step 5: Avoiding pitfalls and seeking expert guidance
The IRS treats quarterly shortfalls like an interest-bearing loan. The underpayment penalty equals the federal short-term rate plus three percentage points, applied daily. With rates hovering near 6% annualized in recent years according to Brighton Jones, small miscalculations snowball fast.
When cash runs tight, it’s still better to file. The agency charges a late-filing penalty of 5% of unpaid tax per month, while the late-payment charge tops out at 0.5%. Filing on time but paying what you can eliminates the larger fee.
Keep these records on hand:
EFTPS or Direct Pay confirmations for every quarter
Completed worksheets inside Form 1040-ES showing your calculations
Forecasts, invoices, and receipts supporting income and deduction estimates
When reality drifts from projections, rerun the 1040-ES worksheet and use the next deadline to course-correct. This mid-year adjustment helps you stay within Safe Harbor thresholds.
Many LLC owners choose to outsource the math. A seasoned CPA or Enrolled Agent can model payroll withholding versus estimated payments, navigate multi-state income, or time tax-efficient retirement contributions within your quarterly strategy. Professional help often costs less than a single mis-timed payment or overlooked deduction.
Mastering LLC tax compliance
Quarterly taxes follow a predictable rhythm: Base calculations on the Form 1040-ES worksheet, structure payments around IRS safe-harbor thresholds, and you'll avoid underpayment penalties even when final numbers shift.
It’s important to treat those four due dates as financial checkpoints. Review year-to-date income, rerun the worksheet, and adjust the next payment if profits have moved significantly. This habit frees up mental energy for growth decisions instead of last-minute tax scrambles.
Ready to streamline your LLC tax obligations? Consider setting up a dedicated tax savings account to automatically set aside funds for quarterly payments. With Relay, you can create multiple checking accounts with automated transfers that align perfectly with the quarterly tax schedule. This approach helps you avoid last-minute scrambles for funds while ensuring you meet IRS deadlines consistently.
Relay is a financial technology company and is not an FDIC-insured bank. Banking services provided by Thread Bank, Member FDIC. FDIC deposit insurance covers the failure of an insured bank. Certain conditions must be satisfied for pass-through deposit insurance coverage to apply.
