Estimated quarterly tax based on profit and entity structure.
Inputs
22%, 24%, 32%, 35%
Annual tax estimate
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Tax breakdown
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About this calculator
Quarterly tax estimation is the most common founder finance failure. Founders earn profit, spend or reinvest it, then face April with no reserve for the IRS bill. The result: scrambling to liquidate inventory, taking emergency loans, or worse, going on IRS payment plans that destroy the next year\'s cash flow. Quarterly discipline prevents this.
This calculator estimates quarterly tax based on profit and entity structure. Sole prop / single-member LLC: full profit subject to self-employment tax (15.3%) plus federal income tax plus state. S-corp: reasonable salary subject to FICA, distribution subject only to income tax — typically saves $5-15K/year on $150K+ profit. C-corp: 21% flat federal at corporate level, plus dividend tax if money is distributed.
The strategic decision: sole prop / LLC works for early-stage low-profit operations. S-corp election makes sense once net profit exceeds $80-100K consistently. Below that, S-corp compliance costs (separate payroll, quarterly 941s, reasonable comp documentation) exceed the FICA savings. Above that, the savings compound year over year.
Pair with the Cash Flow Runway calculator (ensure tax reserve doesn\'t break runway) and the Profit Reinvestment Modeler (account for tax drag in compounding projections). Most successful operators maintain a separate "tax reserve" account, transferring 25-35% of monthly net profit, and pay quarterlies from that account rather than operating cash. This single habit eliminates the April scramble.
Frequently asked questions
Why pay quarterly?
IRS requires estimated quarterly payments for businesses owing $1K+ in annual tax. Skipping triggers underpayment penalties (currently 8% APR on shortfall). Most ecommerce founders owe quarterly from year 1 of profitability.
What's the safe-harbor rule?
Pay 100% of last year's tax liability (110% if AGI over $150K) and you avoid penalty even if this year's tax is higher. The simplest planning approach for growing businesses with unpredictable income.
Sole prop vs LLC vs S-corp?
Sole prop / LLC: pay self-employment tax (15.3%) on full profit + income tax. S-corp: pay reasonable salary (subject to FICA) + remaining profit as distribution (no FICA). S-corp election typically saves $5-15K/year once profit exceeds $80-100K.
When should I elect S-corp?
When net profit consistently exceeds $80-100K. Below that, S-corp compliance costs (separate payroll, 1120-S filing, reasonable comp documentation) eat the FICA savings. Above $100K profit, S-corp election usually nets $5-10K+/year after compliance costs.
Should I work with a CPA?
Yes, once profit exceeds $50K/year. DIY taxes for ecommerce gets messy fast — inventory accounting (cash vs accrual), state nexus (sales tax in 20+ states with thresholds), and entity election timing each justify $1-3K/year in CPA fees.