Quarterly Estimated Tax Payments: A Colorado Small Business Owner's Guide

If you run a business that does not withhold taxes from your paychecks — meaning you are a sole proprietor, partner, or S-Corp owner taking distributions — the IRS expects you to pay your tax bill in installments throughout the year. So does Colorado. Get the timing wrong and the underpayment penalty starts compounding before you have even filed.

Here is what Colorado small business owners need to know to stay ahead.

The Four Federal Deadlines

Federal estimated tax payments are due four times a year. Despite the name, they are not evenly spaced:

• April 15 — Q1 (covers income from January through March)
• June 15 — Q2 (covers income from April through May)
• September 15 — Q3 (covers income from June through August)
• January 15 of the following year — Q4 (covers income from September through December)

If a deadline falls on a weekend or federal holiday, the due date shifts to the next business day.

How Colorado Mirrors the Federal Schedule

Colorado uses the same four quarterly deadlines for state estimated taxes. If your Colorado-source income produces a state tax liability of $1,000 or more, you are required to pay quarterly. Form DR 0104EP (individuals) and Form DR 0106EP (S-Corps and partnerships) are filed with each payment, or you can pay through Revenue Online.

The Two Safe Harbors

The IRS gives you two ways to avoid an underpayment penalty:

1. The 100/110% rule. Pay at least 100% of last year's total tax (110% if your prior-year adjusted gross income was over $150,000), spread across the four quarters.
2. The 90% rule. Pay at least 90% of the current year's actual tax liability.

Whichever target is lower is what you have to hit. For most small business owners, the 100/110% rule is simpler — you already know last year's number, so dividing it by four gives you a clear target.

Colorado has its own safe harbor calculation that closely mirrors the federal rule. Your Colorado CPA should run both at once.

What Happens If You Underpay

If you miss the safe harbor, the IRS charges underpayment interest on the shortfall, calculated quarter by quarter. The federal rate floats with short-term Treasury rates plus 3 percentage points — over the past several years it has hovered in the 7–8% range, charged on the underpayment for the entire period it was overdue. Colorado adds its own interest at the state rate. The penalty can add up quickly on a six-figure income.

Common Mistakes to Avoid

Treating it as optional. Some owners only pay at year-end. The penalty for waiting is real, even if you make up the full amount on April 15.

Forgetting the September deadline. Q3's September 15 due date is the most-missed of the four — far enough from tax season that it slips off the calendar. Set a reminder.

Ignoring a big income spike. If you closed a much bigger deal in Q3 than expected, your remaining estimated payments may need to go up. The annualized income method on Form 2210 lets you reflect uneven income, but it requires more precise quarter-by-quarter calculation.

Mixing federal and state. They go to two different agencies. Using the wrong voucher or addressing the check incorrectly causes weeks of administrative cleanup.

Our Approach

For our flat-fee clients, estimated tax payments are part of the engagement. Each quarter we look at your year-to-date income, recalculate the projection, and either confirm or update the payment. The goal is no surprise check at year-end and no surprise penalty letter from the IRS or Colorado DOR.

If you have been guessing at your quarterly numbers — or skipping them entirely — a quick conversation can get you on a defensible schedule before the next deadline.