The One Big Beautiful Bill Act introduced a number of tax breaks for individuals and businesses that are effective for 2025. Most of the changes are positive and can mean lower taxes. Many of these changes impact tax bills for this year. Individuals and C corporations may want or need to adjust their estimated taxes.
What to know about your estimated taxes
When are estimated taxes due
The third and fourth installments of estimated taxes remain to be paid. Payment dates for individuals and calendar-year C corporations:
- Third installment is due September 15, 2025
- Fourth installment is due December 15, 2025, for corporations and January 15, 2026, for individuals
Why should changes be made
Paying estimated taxes is a Goldilocks exercise. You don’t want to overpay because this amounts to an interest-free loan to the government (it’s a while before you get your money back). You don’t want to underpay because you may be subject to penalties. You want your payments to be “just right.” It’s difficult to nail down the exact amount of taxes that will be owed for the year, but that’s why it’s called “estimated” taxes.
The One Big Beautiful Bill Act made many changes that may favorably impact 2025 tax returns. This could warrant a reduction in the final two installments of estimated taxes for 2025. Here are just some of the changes of note that could mean a smaller tax bill for 2025 and less money needed for estimated taxes:
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For businesses:
100% bonus depreciation; increased Section 179 deduction; expensing of R&D costs (and acceleration of the deduction for certain prior costs).
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For individuals:
Higher standard deduction amounts; bonus additional standard deduction for seniors with income below set limits; no-tax-on tips deduction; overtime pay deduction; deduction for interest on car loans; increased SALT cap; increased child tax credit.
What if adjustments aren’t made
If estimated tax installments for the remainder of 2025 are not made, then what happens depends on whether total estimates are above or below the final tax bill.
If estimates are too high.
In general, you can’t recoup overpayments until you file a return. Excess tax payments can be refunded or applied toward estimated taxes in the following year. But corporations can apply for a “quick refund” if they overpay estimated taxes by at least 10% of expected liability or $500 or more. The IRS must act within 45 days of the request. Details are contained in the instructions to Form 4466. There is no quick refund option for individuals (including small business owners).
If estimates are too low.
If, after filing a return for the year, it turns out that estimated payments did not cover the final bill, penalties may apply. Fortunately, there are certain safe harbors that can be used to avoid penalties.
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C corporations.
No penalties apply if the total tax due is less than $500 or if the corporation paid 100% of the prior year’s tax as the current year’s estimated taxes.
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Individuals:
No penalties apply if the total tax due is less than $1,000, or if the individual paid 100% of the prior year’s tax as the current year’s estimated taxes or 90% of the current year’s liability.
How does wage withholding affect estimated taxes
Employees can use withholding from their paycheck to meet their pay-as-you-go obligation for federal income taxes and minimize or avoid the need to make estimated tax payments. Employees may want to avoid being over-withheld for 2025 if they qualify for new tax breaks. They can file a new Form W-4 with their employer.
What employers need to do.
You must implement the new withholding request no later than the start of the first payroll period ending on or after the 30th day from the date the revised W-4 is received.
Final thought
Estimated taxes aren’t an exact science. Consult with a tax pro to help determine the optimum payments for your situation.
To learn more about estimated taxes, see this list of blogs here.
