One common hiccup that can disrupt your cash flow is missing an estimated tax payment. If you’ve found yourself in this situation, it’s essential to know how to mitigate the consequences and stay on track with the IRS. As a business owner with a thriving business, managing taxes is critical to maintaining your financial health and avoiding penalties.
The Cost of Missing a Payment
The IRS doesn’t just send you a reminder and move on—they charge a non-deductible interest penalty, meaning you pay extra with no tax benefit. Missing even one payment could cost you thousands.
Example:
Imagine you’re expected to pay $25,000 in estimated taxes each quarter. If you miss your June 16 payment and don’t catch up until September, the IRS might assess a penalty of 6% annualized on that missed amount. That’s approximately $375 for just a few months of delay—money you can’t write off. Multiply that across multiple missed payments, and the cost adds up fast.
How to Make Payments
To catch up on a missed payment, use one of these methods:
IRS Direct Pay
Electronic Federal Tax Payment System (EFTPS)
IRS2Go Mobile App
Payment by Card or Digital Wallet
Mail a Check or Money Order
Pro Tip: Make a catch-up payment as soon as possible. While this won’t erase the penalties already accrued, it will stop them from growing.
Many business owners struggle with irregular income streams, making it hard to estimate payments. The solution? Pay either 90% of your current year’s tax liability or 100% of last year’s tax liability (110% if your income exceeds $150,000).
Avoid Future Penalties
Pay estimated taxes on time: April 15, June 16, September 15, and January 15.
Use automated reminders or financial tools to track payments.
Work with a tax strategist (like us!) to create a plan that accounts for fluctuating income.
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