Do I need to pay Quarterly Estimated Taxes?

“I run a small business in Maryland. Do I really have to make quarterly estimated tax payments, or can I just deal with it at tax time?” Many Maryland business owners ask this, especially LLC owners and contractors who don’t get taxes withheld from a paycheck.

The short answer is that if you expect to owe tax when you file, the IRS and the State of Maryland generally expect you to make tax payments during the year, usually through quarterly estimated tax payments (and not just in April).

When Quarterly Estimates Are Required

For many Maryland small business owners, you need to look at two levels: federal and state.

Owners who expect to owe federal tax, after withholding and credits, usually must make estimated payments. This often applies to Schedule C sole proprietors/single‑member LLCs, partners in partnerships, and S corporation shareholders who receive K‑1 income, instead of a paycheck with withholding.

If you expect to owe Maryland income tax when you file, you may also need to make Maryland estimated payments to avoid penalties.

For both IRS and Maryland, quarterly estimated tax payments are due as follows:

1st quarter - April 15

2nd quarter - June 15

3rd quarter - September 15

4th quarter - January 15 (of the following calendar year)

How to Figure Your Estimated Payments

You can calculate estimates in two basic ways:

Safe harbor approach: Use last year’s tax as a baseline and spread it across four payments. This is simpler and often enough to avoid penalties if your income is similar. There are safe harbor percentages such as 90%, 100%, or 110% - but we recommend working with a tax professional to determine the applicable safe harbors for your situation. The downside of the safe harbor approach is that there is a higher change of overpaying in tax years where your taxable income is higher than the prior year.

Current‑year approach: Estimate this year’s profit and tax more precisely, then divide by four. This can reduce overpaying if your income is dropping or highly seasonal. However, in order for this approach to be accurate, you need to have quality accounting data in place, make careful tax calculations and have a solid understanding of tax deductions and credits. That's why this approach is best handled by a Maryland business tax advisor.

Aventa Tax provides Maryland small business tax preparation and planning that includes setting up a customized estimated‑tax schedule for owners of S corporations, partnerships, and sole proprietorships, taking into account local Maryland tax realities. Further, if you're an attorney or a medical professional, there are additional tax considerations when determining quarterly estimated tax payments.

Common Tax Traps to Avoid

• Ignoring self‑employment tax: Schedule C filers and partners must pay both income tax and self‑employment tax on business profit, which makes estimates larger than many owners expect. The Qualified Business Income Deduction also plays a role and requires tax planning in it of itself.

• Forgetting Maryland and local impact: Even if your federal estimates look fine, Maryland income tax still applies to profits from your business operations.

• S corporation owners relying only on payroll: If your S corporation pays you a salary with withholding but also has profit, you may still need estimates on that K‑1 income (because you are generally charged on your distributive share income - distributed or not).

• As a small business accountant in Germantown Maryland, Aventa Tax regularly helps service‑based businesses and consultants adjust mid‑year when income changes, instead of waiting for an unpleasant tax bill.

When to Get Professional Help

You should strongly consider calling a professional when:

• Your business profit jumped or dropped significantly from last year.

• You just formed an LLC or elected S corporation status and are not sure how owner pay works.

• You run multiple activities (for example, a W‑2 job plus a side consulting business in Montgomery County) and don’t know how to blend withholding and estimates.

Aventa Tax offers year‑round business tax services in Montgomery County Maryland, including bookkeeping support in tools like QuickBooks or Xero, so your numbers are accurate enough to base estimated taxes on real data, not guesses.

If you're a small business owner in Germantown, Rockville, Silver Spring, or anywhere in Montgomery County Maryland and you are unsure whether you should be making quarterly estimated payments, Aventa Tax can walk you through your options and calculate the right numbers for you. To get personal advice and a clear plan, call our office at 301-235-2724 or schedule a consult, so our team can provide small business tax services that help you avoid penalties, reduce surprises, and stay compliant with both IRS and Maryland business tax rules.

Learn more about our business tax services here.

This information is for educational purposes only. Please consult a tax professional for specific advice on your situation.