I just started a small business and want to know if I must pay my income taxes quarterly or at the end of the year?

As a new small business owner, whether you need to pay your income taxes quarterly or at the end of the year depends on your expected tax liability for the year.

1. General Rule for Estimated Tax Payments:
   • If you expect to owe $1,000 or more in taxes when you file your return, you generally must make estimated tax payments on a quarterly basis. This applies to sole proprietors, partners, and S corporation shareholders. You would use Form 1040-ES, Estimated Tax for Individuals, to figure and pay your estimated tax.
2. Quarterly Payment Schedule:
   • For individuals, including sole proprietors, the estimated tax payments are typically due in four installments throughout the year:
     • 1st installment: April 15
     • 2nd installment: June 15
     • 3rd installment: September 15
     • 4th installment: January 15 of the following year
3. Corporations:
   • If your business is structured as a corporation and you expect it to owe $500 or more in taxes when you file its return, you must make estimated tax payments. Corporations use Form 1120-W, Estimated Tax for Corporations, to figure the estimated tax. The installment payments for corporations are due by the 15th day of the 4th, 6th, 9th, and 12th months of the corporation's tax year.
4. Exceptions and Special Rules:
   • There are exceptions and special rules for certain types of taxpayers, such as farmers, fishermen, and nonresident aliens, which may alter the number and timing of required installments.
5. Pay-as-You-Go System:
   • The federal income tax system operates on a pay-as-you-go basis, meaning taxes must be paid as income is earned or received during the year. This is to avoid a large tax bill at the end of the year and potential penalties for underpayment.
6. Filing Requirements:
   • When you file your annual income tax return, you will include the income from your business on your Form 1040, U.S. Individual Income Tax Return, along with the appropriate schedules (e.g., Schedule C for sole proprietorships).

In summary, as a small business owner, you are generally required to make quarterly estimated tax payments if you expect to owe $1,000 or more in taxes when you file your return. This ensures compliance with the pay-as-you-go system and helps avoid penalties for underpayment.

Sources:
Publication 583 (1/2021)
Publication 542 (1/2024)
Publication 334 (2023)
§ 6654. Failure by individual to pay estimated income tax
Publication 4128 (5/2020)