The midpoint of the year brings two priorities for small business owners. The first is immediate: a quarterly estimated tax payment is due June 15. The second is strategic: with six months still ahead, there is ample time to make decisions that will shape your year-end tax position. This post covers both.
The June 15 deadline
Business owners who do not have taxes withheld from a paycheck are generally required to pay tax throughout the year rather than in a single April payment. These are quarterly estimated taxes, and the second-quarter installment is due June 15.
Generally, if you expect to owe at least $1,000 in tax for the year, estimated payments apply to you. This includes most sole proprietors, single-member LLCs, partners, and S-corporation owners who take distributions.
One detail often catches people off guard: the estimated tax quarters are not equal three-month periods. The June payment covers income earned in April and May only. It is worth confirming your payment reflects the correct period rather than assuming it aligns with a standard calendar quarter, especially as you prepare your tax returns for the year.
Determining how much to pay
The IRS provides two safe harbor thresholds that protect you from underpayment penalties:
- Pay at least 90% of the tax you will owe for the current year
- Pay 100% of the tax you owed last year (110% if your income exceeds the higher-income threshold)
For many businesses, the second option is the most practical. If your income is reasonably consistent year over year, basing your payments on last year's liability keeps the calculation straightforward while keeping you within the penalty-free zone.
A note for California businesses: the Franchise Tax Board maintains its own estimated tax schedule, and the percentages due each quarter are weighted differently than the federal schedule. If you operate in California, confirm your state payment separately rather than assuming it mirrors your federal installment.
Four planning items worth reviewing now
The midpoint of the year is the most effective time to plan, because there is still time to act on what you find.
1. Compare actual income to your projection
If revenue has outpaced your expectations, your estimated payments may be running short. Adjusting now is far preferable to discovering a shortfall when you file. Reliable books in QuickBooks Online make this comparison straightforward.
2. Review your retirement contributions
Vehicles such as a SEP-IRA or Solo 401(k) can meaningfully reduce taxable income, and the amount you can contribute is often tied to business profit. Knowing your numbers now allows you to plan contributions deliberately.
3. Plan major purchases carefully
If you intend to acquire equipment, a vehicle, or other significant assets, both the timing and the applicable deduction rules matter. Depreciation provisions have changed in recent years, so this is a decision best mapped out with your accountant in advance.
4. Reassess your business structure
As profit grows, the entity that suited you at the outset — sole proprietorship, LLC, or S-corporation — may no longer be the most tax-efficient. The middle of the year is an opportune, low-pressure time to evaluate whether a change is warranted.
In summary
Estimated taxes are a means of avoiding a difficult April. Note the June 15 deadline, submit your payment, and treat this midpoint as an opportunity to plan forward rather than simply review the past.
If you are uncertain whether estimated taxes apply to you, how much to remit, or whether your current structure still serves you well, we are glad to help. Contact Stone Accounting Services to review your numbers together.
This post is provided for general educational purposes and does not constitute specific tax advice. Every business is different. We welcome the opportunity to discuss yours.
