Quarterly Estimated Taxes Explained (The Safe Harbor Rule)

Quarterly Estimated Taxes Explained (The Safe Harbor Rule) The IRS safe harbor rule: pay in at least 100% of last year's total tax through quarterly estimates and the underpayment penalty goes away. A Schedule C sole proprietor has no employer withholding, so the IRS expects estimated payments through the year: Q1 through Q4, not one check in April. Skip them and the underpayment penalty stacks on top of the bill; the example in this lesson was $8,000 in penalties just for paying late. The fix: find last year's total tax on Form 1040 line 24, pay in at least 100% of it through the four quarterly estimates, and the penalty goes away even if this year's income comes in higher. US federal rules for Schedule C sole proprietors, 2026. General education; your numbers come off your own 1040. 0:00 The sole proprietor April surprise 1:22 How quarterly estimated tax payments work 2:04 The underpayment penalty problem 3:20 Finding last year's total tax on your return 4:19 The safe harbor rule: 100% of last year 5:07 Splitting the payment into four quarters What are quarterly estimated tax payments? Prepayments a Schedule C sole proprietor sends the IRS through the year, quarter by quarter, because no employer is withholding for you. What happens if I skip estimated payments? The IRS charges underpayment penalties on top of the April bill; in the example here that was $8,000 in penalties for simply not paying on time. What is the IRS safe harbor rule? Pay in at least 100% of last year's total tax through estimates and you will not be penalized, even if this year's bill ends up higher. Where do I find last year's total tax? On your Form 1040, line 24, the total tax line; divide it by four and that is each quarterly payment under the safe harbor. Stephen Mandracchia, CFP® and IRS Enrolled Agent Tulip Financial Planning LLC, Alabama registered investment adviser Book a 30-minute call: https://tulipfp.com/?utm_source=youtu... Stephen Mandracchia, CFP®, Enrolled Agent. Tulip Financial Planning LLC is an investment adviser registered in the State of Alabama. This video is general education and not personalized tax, legal, or investment advice, and watching it does not create an advisory or client relationship. Any examples are hypothetical and for illustration only. They are not client results and no outcome is guaranteed. Tax rules change and results depend on your specific facts. Comments reflect the views of individual viewers, are not verified by Tulip, and are not testimonials or endorsements. #EstimatedTaxes #SelfEmployed #TaxPlanning