For many business owners and self-employed professionals, December is more than the holiday season. It is the final chance to prepare for the fourth quarter estimated tax payment. Missing or miscalculating this payment can lead to penalties, cash flow issues, and IRS notices at the start of the new year. With a CPA as part of your financial arsenal, you can enjoy the holidays instead of stressing over tax payments.
Here is what Central Valley businesses should know about the fourth quarter estimate, how it works, and how to stay compliant before the deadline.
Why Estimated Taxes Matter
The IRS requires taxpayers to make estimated payments if they expect to owe at least $1,000 in tax for the year after withholding and credits. This includes small business owners, gig-economy earners, independent contractors, landlords, agricultural operations, and individuals with investment income.
Estimated payments help cover taxes on income that is not withheld automatically, such as:
- Business or self-employment earnings
- Rental income
- Dividends and capital gains
- Agricultural income
- Retirement distributions without sufficient withholding
Paying on time prevents underpayment penalties and keeps your year-end balance manageable.
When Is the Fourth Quarter Estimate Due?
Even though it is called the fourth quarter estimate, the payment is due January 15 of the following year. For the 2025 tax year, the deadline to submit your fourth quarter estimate is January 15, 2026.
However, December is the month when most businesses should review income, finalize books, and calculate the amount owed. This ensures the payment is accurate and avoids surprises.
How to Calculate Your Fourth Quarter Estimate
- Year-to-date income
- Business expenses
- Withholding amounts
- Applicable tax credits
- Self-employment tax obligations
If your income has fluctuated throughout the year, you may be eligible to use the annualized income method. This approach can reduce penalties if your earnings were uneven, which is common for agricultural businesses, consultants, and seasonal industries in the Central Valley.
DDC helps clients run these calculations using accurate year-end financials and projected income, removing the hassle from the business owner.
Common Mistakes to Avoid
Ignoring income changes
Many businesses earn more during certain months. If your fourth quarter was stronger than expected, your earlier estimates may not cover your total tax liability.
Forgetting to include the self-employment tax
Self-employment tax can be significant. IRS worksheets help calculate both income tax and self-employment tax in the estimate.
Making payments too late
The IRS charges penalties even if you pay your full taxes in April. Timely quarterly payments prevent this.
Not adjusting for tax law updates
Updated IRS rates, mileage deductions, and credit limits can change your total tax owed.
How DDC Helps Central Valley Clients
DDC supports individuals and businesses by reviewing their financials, estimating tax liability, and preparing accurate fourth-quarter payments. Our team evaluates income, deductions, withholding, and credits to ensure the payment meets IRS standards and avoids penalties.
The fourth quarter estimate is an important step in staying compliant with IRS requirements and avoiding unwanted penalties. Taking time in December to review your financials, calculate your projected tax, and plan for the January deadline sets your business up for a smooth transition into the new year. With the right guidance, you can make accurate payments, strengthen your cash flow planning, and reduce stress during tax season.
Stay ahead of the January deadline and avoid penalties. Contact DeMera DeMera Cameron today for help preparing your fourth-quarter estimated tax payment.