Estimated Taxes for Medical Practice Owners: How to Pay the IRS Quarterly Without Overpaying

By Brian Giesecke, CPA/EA | Giesecke Advisory

If you're a self-employed medical practice owner, the IRS wants their money throughout the year. Not just in April.

That's where estimated tax payments come in — quarterly payments made using IRS Form 1040-ES. And a lot of practice owners find them confusing.

Let's make it simple.

Why Do Practice Owners Have to Pay Estimated Taxes?

When you're a W-2 employee, taxes are withheld from every paycheck.

When you're self-employed, there's no employer withholding for you. So the IRS says: pay us quarterly instead. This applies to income tax, self-employment tax (15.3% covering Social Security at 12.4% and Medicare at 2.9%), and any other tax you'd normally owe.

If you don't pay enough, you get hit with underpayment penalties under IRC Section 6654.

When Are Quarterly Estimated Tax Payments Due?

• Q1: April 15th
• Q2: June 15th
• Q3: September 15th
• Q4: January 15th

Yes, the quarters aren't equal lengths. Don't ask me why.

How Much Should Practice Owners Pay in Estimated Taxes?

There are two safe harbor rules — ways to avoid penalties regardless of what you end up owing:

Safe Harbor #1: Pay at least 100% of last year's total tax liability (110% if your adjusted gross income exceeded $150,000, or $75,000 if married filing separately).

Safe Harbor #2: Pay at least 90% of this year's tax.

Most practice owners use the first option. It's predictable.

The formula: Last year's tax ÷ 4 = each quarterly payment.

The downside: if this year is much better than last year, you'll still owe in April.

When Should You Adjust Your Quarterly Payments?

Using last year's tax is safe but not always optimal.

If income is higher this year, consider paying more. Otherwise, you're setting up an April surprise.

If income is lower, you might be overpaying.

Check in at mid-year. Compare actual to projected. Adjust Q3 and Q4 if needed.

Common Estimated Tax Mistakes Practice Owners Make

Not paying at all. Some practice owners just pay everything in April. The penalties add up.

Using last year's number when income doubled. Safe harbor protects from penalties, but you still owe the tax.

Forgetting state estimates. Most states with income tax also require estimated payments.

Frequently Asked Questions

What happens if I miss a quarterly estimated tax payment? The IRS charges an underpayment penalty calculated using the federal short-term rate plus 3 percentage points, applied to the underpaid amount for the period it was late. You can calculate this using IRS Form 2210. The penalty is per-quarter, so missing one payment doesn't affect the others.

Can I pay estimated taxes through my S-corp salary withholding instead? Yes — and this is actually a powerful strategy. W-2 withholding is treated as paid evenly throughout the year regardless of when it's actually withheld. So if you realize in Q4 that you're short, increasing your S-corp salary withholding in December can cover the entire year without quarterly penalties.

Key Takeaways

• Estimated taxes are due quarterly using IRS Form 1040-ES: April 15, June 15, September 15, and January 15
• The self-employment tax rate is 15.3% (12.4% Social Security + 2.9% Medicare), and this is in addition to income tax
• Safe harbor rule: Pay 100% of last year's tax liability (110% if AGI exceeded $150,000) to avoid underpayment penalties under IRC Section 6654
• Mid-year review is critical — compare actual income to projections and adjust Q3/Q4 payments accordingly
• State estimated taxes are separate — most states with income tax also require quarterly estimated payments

Your Next Step

Look at your last quarterly payment. How did you calculate it?

If the answer is "I guessed"... it might be worth revisiting.

A mid-year check-in with your accountant can help dial in the right number.