How to set aside money for taxes, and when to pay them

Who this is for

Sole proprietors, single-member LLCs and partners. You owe income tax on your profit plus self-employment tax, which is the Social Security and Medicare tax you pay as both employee and employer. If your LLC is taxed as an S corporation, you pay yourself through payroll and the rules differ.

Step 1: Find your percentage

Use the Self-Employment Tax Calculator. Enter your expected profit for the year, your filing status and your state. A single owner with $60,000 of profit and no other income owes about $12,989 in federal taxes, or 22% of profit. In a state with a 2.75% flat tax, add about $1,533. The total is about $14,522, or 24% of profit. That percentage is your number. Yours will differ, which is why a flat rule of thumb usually misses.

Step 2: Set it aside from profit, not from sales

Tax is owed on profit: what is left after business expenses. At 24%, move $242 of every $1,000 of profit. If you can’t separate profit from sales yet, move your percentage of each deposit and square it up when you close your books each month.

Step 3: Put it in its own account

Open a separate savings account and name it “Taxes.” Move the money the day you are paid. Money left in checking gets spent, and the tax bill is the one bill that is certain. Treat the account as the government’s money, not a cushion.

Step 4: Pay on four dates

For the 2026 tax year, federal estimated payments are due:

• April 15, 2026
• June 15, 2026
• September 15, 2026
• January 15, 2027

If a date falls on a weekend or holiday, it moves to the next business day. Four equal payments of the $14,522 example would be about $3,631 each. Pay through IRS Direct Pay or your IRS online account. If you file your 2026 return by February 1, 2027 and pay everything owed with it, the January payment isn’t required.

Step 5: Pay your state too

Most states with an income tax have their own estimated payments, paid on the state’s website. Nine states don’t tax wages: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. Check your state’s revenue department for its dates, which don’t always match the federal ones.

Do you have to make estimated payments?

Generally yes, if you expect to owe $1,000 or more after withholding and credits. You avoid an underpayment penalty by paying at least 90% of this year’s tax or 100% of last year’s. If last year’s adjusted gross income was over $150,000 ($75,000 if married filing separately), the second figure is 110%. Paying 100% of last year’s tax is the easy way to be safe when this year is growing fast.

When your income is uneven

Seasonal owners often earn most of the year’s profit in a few months. The IRS has an annualized method that lets you pay less early and more later, using Form 2210. Ask your tax preparer; it saves the penalty without overpaying early.

Keep it current

• Re-run the calculator each quarter with your actual year-to-date profit.
• If you pay more than needed, the extra comes back as a refund or credit.
• If a month is slow, still move the percentage of what you earned. Skipping it makes the next quarter harder.

In a spreadsheet

Format B4 as a percentage. Use your own percentage from the calculator.

Published by Groundwork Business Advisory. Updated October 23, 2026.