Why this matters

When you’re self-employed and take leave, your employer won’t withhold taxes for you. That makes quarterly estimated payments essential to cover both income tax and self-employment tax (Social Security and Medicare). In my practice helping families plan cash flow around parental leave, the most common problems are underestimating income during partial work months and forgetting to include taxable leave benefits.

Step-by-step: how to calculate estimated taxes during leave

  1. Project annual income and taxable benefits
  • Estimate net self-employment earnings for the year (gross receipts minus ordinary and necessary business expenses). Include any taxable paid family leave, short-term disability, or state benefits you expect to receive — these are often taxable. See IRS guidance on what counts as taxable income (IRS — Estimated Taxes).
  1. Add self-employment tax
  • Self-employment tax covers Social Security and Medicare and is generally 15.3% on net earnings subject to the tax. You can deduct one-half of your self-employment tax when calculating income tax. See IRS Publication 505 and Form 1040-ES for worksheets (Form 1040-ES; Publication 505).
  1. Estimate income tax
  • Apply federal income tax rates to taxable income (after deductions and credits you expect to claim). If you expect significant credits (for example, the Child Tax Credit), include them in your year-end projection.
  1. Use the safe-harbor rules to avoid penalties
  • To avoid underpayment penalties, generally pay either 90% of the current year tax or 100% of last year’s tax (110% if your adjusted gross income was over $150,000). Confirm thresholds on the IRS site (Estimated Taxes).
  1. Divide and schedule quarterly payments
  • Divide the estimated annual tax into quarterly payments. Make adjustments if you expect income or deductible expenses to change during leave.

Practical examples

  • Example A (short leave with steady income): You normally earn $60,000 net. Planning a three-month leave with no taxable leave benefits, you estimate a small drop in annual income. Recalculate net income, add SE tax, compute income tax, then divide by four to get quarterly payments.

  • Example B (partially paid leave): If you receive $6,000 in taxable paid family leave while taking three months off, add that to your projected taxable income and recalculate. That additional income increases both income tax and possibly your quarterly payment amount.

Quarterly payment schedule (typical)

Quarter Typical due date
Q1 April 15
Q2 June 15
Q3 September 15
Q4 January 15 (following year)

Note: When due dates fall on weekends or federal holidays, the IRS moves the deadline to the next business day. Always check current-year deadlines.

Adjusting payments mid-year

  • Recalculate when circumstances change: if you return to work earlier/later than planned, take more/less paid leave, or have a big fluctuation in business income, update your projections and change remaining quarterly payments.
  • Keep detailed records of income and expenses so you can tighten forecasts quickly.

Payment methods and tools

  • Use IRS Form 1040-ES worksheets to estimate and the Electronic Federal Tax Payment System (EFTPS) or IRS Direct Pay to submit payments. For practical guidance on electronic payments, see our guide to paying taxes online: “Paying Taxes Online: A Guide to EFTPS and Other Electronic Payment Methods”.

Interlinks (useful related FinHelp articles)

Common pitfalls I see in practice

  • Ignoring taxable benefits: State paid leave or disability benefits are often taxable — include them in estimates.
  • Forgetting self-employment tax: Some clients estimate only income tax and later face a larger-than-expected bill because they left out SE tax.
  • Relying on equal quarterly payments when income is highly lumpy: adjust payments as income is received.

Tips to reduce surprise tax bills

  • Keep a running monthly projection and update with real receipts.
  • Build a small reserve (10–20% of expected tax) during high-income months to cover leave periods.
  • Consider increasing estimated payments before leave if you expect a year with higher-than-normal income.

When to get professional help

If your income mix is complex (pass-through income, rental income, multiple states, or significant benefits during leave), consult a CPA or enrolled agent. In my 15 years advising families, small timing changes and overlooked taxable items are the most common reasons clients owe unexpectedly.

Authoritative sources and further reading

Professional disclaimer

This article is educational and does not replace personalized tax advice. For guidance tailored to your situation, consult a licensed tax professional or CPA.