Estimated Taxes for Sole Proprietors and Business Owners in Pittsburgh: What You Need to Know

Estimated taxes are advance payments made to the IRS throughout the year on income that isn’t subject to withholding. For sole proprietors and business owners in Pittsburgh, this includes income from self-employment, rental properties, interest, dividends, and capital gains. Paying enough tax during the year is essential to avoid penalties. Let’s break down the essentials of estimated taxes for 2025.

Who Needs to Pay Estimated Taxes?

You must pay estimated taxes if both of the following apply:

• You expect to owe at least $1,000 in tax after subtracting withholding and credits.

• Your withholding and credits will be less than the smaller of:

  • 90% of your expected tax for the current year, or

  • 100% of the tax you owed last year (110% if your income was over $150,000 or $75,000 if married filing separately).

This applies to self-employed individuals, freelancers, and business owners who do not have taxes withheld from their income.

Exemptions from Estimated Taxes

You are generally exempt from paying estimated taxes if:

• You had no tax liability last year.

• You were a U.S. citizen or resident alien for the entire year.

• Your prior year’s tax return covered a full 12-month period.

Calculating Your Estimated Taxes

To calculate your estimated taxes, estimate your adjusted gross income (AGI), taxable income, deductions, credits, and taxes for the year. Use Form 1040-ES as a guide.

1. Estimate your total income for the year.

2. Subtract any adjustments to income.

3. Subtract either your standard deduction ($15,000 for single or married filing separately, $22,500 for head of household, and $30,000 for married filing jointly or qualifying surviving spouse in 2025) or your itemized deductions.

4. Apply the 2025 tax rates to calculate your tax.

5. Deduct any expected tax credits.

6. Add self-employment tax, if applicable (with a social security wage base limit of $176,100 for 2025).

7. Divide the final tax amount by four to determine each quarterly payment.

Payment Deadlines for 2025

Estimated taxes are due quarterly on these dates:

• April 15, 2025: Income earned from January 1 to March 31

• June 16, 2025: Income earned from April 1 to May 31

• September 15, 2025: Income earned from June 1 to August 31

• January 15, 2026: Income earned from September 1 to December 31

Farmers and fishers may qualify to make a single payment by January 15.

Methods of Payment

• Online: Use IRS Direct Pay, debit/credit cards, or EFTPS.

• By Phone: Contact IRS-authorized service providers.

• By Mail: Send a check or money order with Form 1040-ES.

• Mobile: Use the IRS2Go app.

Avoiding Penalties

Pay the correct amount of tax by each deadline to avoid penalties. Even if you expect a refund when filing your return, underpayment during the year may result in penalties. Farmers and fishers need to pay at least 66.67% of their current year’s tax or 100% of the prior year’s tax by January 15.

Final Thoughts

Staying on top of estimated taxes is essential for Pittsburgh’s sole proprietors and business owners. Accurate calculations and timely payments will help you avoid penalties and remain compliant with tax regulations. For personalized assistance with your estimated payments, contact us today for expert help tailored to your business needs.