For many small business owners and self-employed professionals, estimated tax payments feel like just another box to check each quarter. But your Q4 payment, due January 15, isn’t just a deadline. It’s a final opportunity to align your tax strategy with the reality of your year and hang onto more of your cash heading into the new one.

If Q4 is when you’re finalizing budgets, weighing purchases, or reviewing payroll, it’s also the right time to revisit your tax outlook. With the books nearly closed, there’s more clarity, and more room to be strategic.

Why Q4 Is Different

The IRS requires quarterly estimated tax payments from anyone who doesn’t have enough tax withheld through a paycheck. This includes sole proprietors, partners, S corp shareholders, and many freelancers and consultants.

These payments are typically due in April, June, September, and January. But that last one? It lands after the year is over, which means it’s the only payment you can calculate based on actuals instead of estimates.

That’s what makes it strategic.

Avoiding Penalties vs. Optimizing Payments

To avoid IRS penalties, you can follow one of two safe harbor rules:

• Pay 100% of last year’s total tax (or 110% if you made more than $150,000)
  
  
• Pay 90% of the tax you owe for this year
  
  

If you’ve already met one of these thresholds, you’re in good shape from a compliance standpoint. But compliance doesn’t always equal efficiency. Many businesses overpay just to stay safe, tying up cash they could be using elsewhere.

That’s where planning comes in.

Use Your Q4 Payment as a Leverage Point

Update Your Income Projections
By now, you have real numbers—not just projections. Pull your year-to-date financials and compare them to your original estimates. If you’re tracking well above or below, your Q4 payment might need to shift to reflect your actual tax liability.

Factor in Big Year-End Moves
Did you invest in new equipment? Hire or downsize staff? Make an extra marketing push? These can significantly impact your taxable income. Capital investments, in particular, may qualify for deductions like Section 179 or bonus depreciation—lowering your final tax bill.

Time Your Income and Expenses Thoughtfully
If you report on a cash basis, timing matters. Consider whether it makes sense to pay certain vendors or contractors before year-end, or hold off on issuing invoices until January. These timing decisions could change your tax outlook just enough to make a difference.

Just be mindful—this approach should support your long-term financial health, not just short-term tax reduction.

Include Non-Business Income
Estimated tax isn’t just about what your business earned. If you’ve received income from investments, real estate, side projects, or pass-through entities, those dollars also factor into your overall liability. Many business owners get caught off guard by forgetting to include these other income streams.

Don’t Forget State Requirements
In New York, state estimated tax deadlines typically follow the federal schedule, but there are nuances around thresholds and filing status. If you operate in more than one state, the picture becomes more complex. Take time to understand where your business has nexus and what each state expects.

It’s More Than Just a Payment

A well-planned Q4 tax strategy gives you more than just peace of mind. It can help:

• Free up cash for early-year expenses
  
  
• Reduce surprises during tax filing
  
  
• Strengthen your overall financial strategy heading into Q1
  
  

Think of it less as a task to complete and more as a final puzzle piece that ties your financial year together.

And if that puzzle feels like it’s missing too many pieces, you’re not alone. We help businesses across New York City and beyond sort out their year-end strategy, from estimated payments to payroll to entity planning.

If you’re wondering whether you’re paying too much (or not enough) we’re just a call away.