Quarterly Estimated Taxes for Houston Business Owners: Who Pays and How Much

Key Takeaways

• You owe quarterly estimated taxes if you expect to owe $1,000 or more in federal tax after withholding and credits.

• Safe harbor keeps the penalty off you: pay 90 percent of this year's tax, or 100 percent of last year's, or 110 percent if last year's AGI topped $150,000.

• The 2026 due dates are April 15, June 15, September 15, and January 15, 2027. The quarters are not equal lengths.

• Texas has no personal income tax, so every one of these payments goes to the IRS.

• The penalty runs like interest on each quarter separately, so a big January payment does not fix a missed April.

Do You Owe Quarterly Estimated Taxes at All?

One number decides this. If you expect to owe $1,000 or more in federal tax when you file, after withholding and credits, the IRS wants that money in four payments during the year instead of one check in April.

That catches almost anyone whose income arrives with no tax already taken out.

Two ways out. If you owed zero federal tax last year, you were a US citizen or resident all year, and that year covered twelve full months, you cannot be penalized this year no matter what you pay in. And if your spouse has a W-2 job, you can raise their withholding instead. The IRS treats withholding as paid evenly through the year, even when it all comes out of one December paycheck. That single move fixes more penalty problems than anything else we do in the fall.

One thing this is not about. Texas has no personal income tax, so your quarterly money goes to the IRS and nowhere else. The state collects through the Texas franchise tax, which is a separate annual filing on its own schedule.

• 1099 contractors and consultants, including a lot of the project work around the Energy Corridor

• Restaurant, salon, and small retail owners on Bellaire Boulevard and out toward Katy and Sugar Land

• Realtors, commission agents, and owner-operators who get a settlement statement instead of a paycheck

• Partners in a partnership, who get a K-1 with nothing withheld on it

Safe Harbor Is the Rule That Keeps the Penalty Off You

Safe harbor is the deal the IRS offers. Hit one of these three numbers across your four payments and you owe no underpayment penalty, even if you end up owing more when you file.

For most owners the middle one is the easy button. Last year's tax is a fact sitting on a return you already filed. Divide it by four, pay that four times, and the penalty question is closed before the year starts. The current year option means guessing your profit twelve months out.

One correction comes up on the phone almost every week. Last year's total tax is not the check you wrote in April. It is the whole tax on the return, before your payments were subtracted. Owners who use the balance due by mistake underpay by thousands.

Safe harbor stops the penalty. It does not shrink the bill. Earn more this year and the difference is still due April 15. Plan for that gap.

• 90 percent of your total federal tax for this year

• 100 percent of your total federal tax from last year

• 110 percent of last year's total tax if your adjusted gross income was over $150,000, or over $75,000 filing married separately

Choose the Method That Fits Your Year

Four ways to size the payments. Pick one on purpose instead of guessing each quarter.

Choose the 100 percent prior year safe harbor if your income is steady or climbing and last year's adjusted gross income was $150,000 or less. Lowest effort, full protection.

Choose the 110 percent version if last year's adjusted gross income was over $150,000. The extra 10 percent buys the same protection at a higher income. Skip it and you lose the safe harbor entirely.

Choose the 90 percent current year method if this year is clearly smaller than last year. A shop that lost a big account should not send payments sized for a year that is not happening. Track profit monthly and pay against the real number.

Choose the annualized income method if your money arrives in bursts. This is the one for the restaurant that does a third of its year around Tet, the roofer who books everything after a storm, and anyone with a dead August. You pay small when you earned small. It runs on Schedule AI of Form 2210 and needs clean books.

Choose payroll withholding instead if you run an S corp with a real salary, or your spouse has a W-2. Withholding counts as paid evenly, so you can fix a shortfall in November that estimated payments could not.

How to Run the Number Yourself

Five steps, about twenty minutes, with your year to date profit in front of you.

Rough shape of it. A single filer with $120,000 of net profit and no other income tends to land near $28,000 to $30,000 in total federal tax, because self-employment tax alone runs close to $17,000. Call it $7,000 to $7,500 a quarter. Your number moves with filing status and deductions, so run yours.

Not doing the math? The shortcut most owners use is setting aside 25 to 30 percent of profit. Rough, but far better than nothing.

All of this rides on books that are current. An estimate built on a shoebox of receipts is a guess in a nice suit. Falling behind on categorization is one of the common bookkeeping mistakes that shows up as a tax problem nine months later.

• Estimate net profit for the full year. Revenue minus real business expenses, not the balance in your checking account.

• Figure self-employment tax. Take 92.35 percent of net profit, then multiply by 15.3 percent. The Social Security half stops once you pass the annual wage cap, and that cap moves every year.

• Figure income tax. Subtract half the self-employment tax, your standard deduction, and the qualified business income deduction, which usually runs about 20 percent of business profit. Apply the brackets to what is left.

• Add the two, then subtract any W-2 withholding and credits you expect.

• Divide by four.

The 2026 Due Dates, and What Storm Season Does to Them

The quarters are not equal. That catches people every year.

When a due date falls on a weekend or federal holiday it slides to the next business day. All four 2026 dates land on weekdays, so there is no free extra day this year. Put all four on the calendar in January, next to your annual filings. It is the same planning session where you budget for what tax preparation costs.

The June and September dates sit inside hurricane season. The IRS has a long history of pushing deadlines back for counties under a federal disaster declaration after a Gulf storm, and Harris, Fort Bend, and Montgomery have all been on those lists. Do not budget around it. Check the IRS newsroom after a declaration and treat a postponement as a bonus.

• Q1 covers January 1 through March 31. Due April 15, 2026.

• Q2 covers April 1 through May 31. Two months, not three. Due June 15, 2026.

• Q3 covers June 1 through August 31. Due September 15, 2026.

• Q4 covers September 1 through December 31. Due January 15, 2027.

What the Penalty Actually Costs

The underpayment penalty is not a flat fine. It works like interest. The IRS charges each quarter's shortfall from that quarter's due date until you pay it or until the return is due, whichever comes first.

The rate is the federal short term rate plus three points and it resets every quarter. It has sat around 7 to 8 percent in recent years. Check the current quarter before you assume.

Say you underpay by $5,000 each quarter at 7 percent. The first quarter's shortfall runs about twelve months, the last one about three. Add them up and you are near $900 for the year. Not a disaster. Also not nothing, and it repeats every year you leave it.

The part owners miss is that each quarter is scored on its own. One large payment in January does not undo a light April. The clock already ran on that money.

Some perspective. This is the mild penalty. Late payroll deposits are scored differently and climb fast, which is why we tell clients to fix payroll first. If you have both problems, start with what payroll tax penalties cost and come back to estimates after.

How to Pay, and How to Keep the Money There Until You Do

Paying is the easy part. Four options work.

Get one thing right on the screen. Pick the correct tax year and select estimated tax as the reason. Payments posted to the wrong year are a chore to move, and the notice that follows looks worse than it is.

The hard part is having the money on the due date. Open a second account that only holds tax money. Move 25 to 30 percent of every deposit into it the day it clears, and leave it alone. Owners who transfer weekly rarely miss a payment. Owners who plan to catch up in December usually do not.

Seasonality is the local trap. Restaurants and salons run their biggest stretch around Tet. Contractors and roofers get buried after a storm and crawl through the heat. Pull the tax money out during the good weeks. The June 15 payment is easier when it was funded in March.

Wondering how much help this needs? It depends on the rest of your books. The payments themselves are a compliance job. The planning around them is not. We wrote a longer piece on whether you need a CPA or just a bookkeeper that shows where the line falls.

• IRS Direct Pay. Free, straight from your bank, nothing to set up. Fine for most owners.

• EFTPS. Free, keeps a payment history, and lets you schedule ahead. Enroll early, the PIN comes by mail.

• Card through an approved processor. Costs about 2 percent, worth it only for rewards or a few extra weeks.

• Paper voucher from Form 1040-ES with a check. Slow, still works.

Frequently Asked Questions

What happens if I miss a quarterly payment?

Nothing happens that day. No letter, no call. The IRS starts an interest style charge on the amount you were short, running from that due date until you pay it or until the return is due, whichever comes first. Pay as soon as you can, because the charge is time based and every week costs a little more. Do not wait for the next scheduled date to catch up. Send it now and treat the next payment separately. The math gets settled on Form 2210 when you file, or the IRS bills you for it after the fact.

Do I have to pay estimated taxes in my first year of business?

Often no, and this is the one exception people miss. If you owed zero federal tax on last year's return, you were a US citizen or resident all year, and that tax year ran twelve full months, no underpayment penalty can hit you this year. That covers a lot of first year owners. It does not mean the tax goes away. You still owe the full amount on April 15, and after a good first year that can be a shock. Set the money aside anyway, even if you skip the quarterly payments.

Do I owe Texas state estimated taxes too?

No. Texas has no personal income tax, so there is no state version of these quarterly payments. Every dollar goes to the IRS. What Texas does have is the franchise tax, which most entities file once a year in the spring. Plenty of small businesses fall under the no tax due threshold and still have to file a report. Do not confuse the two. Franchise tax is annual and sits at the entity level. Estimated tax is quarterly and personal. Owners who move here from California or New York expect a state estimated payment and are relieved there is not one.

How do I know if I need the 110 percent safe harbor instead of 100 percent?

Look at last year's Form 1040 and find your adjusted gross income. If it is over $150,000, or over $75,000 when married filing separately, the prior year safe harbor becomes 110 percent of last year's total tax instead of 100 percent. That threshold does not rise with inflation, so it catches more households every year. If you are close to the line, pay the 110 percent anyway. The extra is a few hundred dollars that comes back as a refund or a credit, and it removes any argument about whether the safe harbor applied.

Can I skip the quarters and pay it all in January?

You can send the money, but it does not fix the penalty. Each quarter is scored on its own. A January payment does nothing for the shortfall that started running back in April, so you still get charged for those months. There is one workaround. If you or your spouse has W-2 income, extra withholding is treated as paid evenly across the year no matter when it came out. That means a large withholding change in November can repair a whole year of missed estimates. Estimated payments cannot do that.

I run an S corp and take a salary. Do I still need estimated payments?

Sometimes. Your payroll withholding covers the tax on your wages, but not the tax on the profit that passes through on your K-1. If the company keeps real profit after your salary, that flows onto your personal return with nothing withheld against it. Two options. Raise the withholding on your own paychecks so it covers both, which is the cleaner path, or make quarterly estimated payments for the pass through piece. Run the math once at midyear and once in October. That is usually enough to see whether the withholding is keeping up.

My income is seasonal. Do I have to pay the same amount each quarter?

No. The annualized income installment method lets your payments follow your actual earnings. You calculate tax on the income you have made so far at each deadline, so a slow spring means a small June payment and a strong fall means a bigger September one. It fits a lot of businesses here, from restaurants busy around Tet to trades that work storm season. The catch is bookkeeping. You need accurate profit figures at four points in the year, not one panicked reconstruction in March. Schedule AI on Form 2210 is where it gets reported.

What if I overpay?

You get it back. An overpayment either comes to you as a refund after you file, or you apply it to next year's first quarter payment, which is what most owners do. Applying it is handy because it covers April without a separate transfer. The real cost of overpaying is cash flow. Money sitting with the IRS earns you nothing and cannot cover payroll in a slow month. Aim to land close to safe harbor rather than far above it, then keep the cushion in your own tax savings account instead.

Talk to a Houston CPA

Nguyen Accounting Group serves Houston small businesses with proactive tax planning, tax resolution, and bookkeeping. See how our tax advisory services and bookkeeping and QuickBooks support work, or book a free 30-minute consult to see if we are the right fit.