June rolls around fast on the Cape.
One week, you’re scrambling to get the restaurant staffed for the season, the next, you’re realizing you may have missed the Q2 estimated tax payment.
It happens, and it’s not the end of the world. But knowing what comes next and what you can actually do about it makes a real difference.
Estimated taxes are the IRS’s way of collecting income tax throughout the year instead of waiting until April. If you’re self-employed, a freelancer, a contractor, or a small business owner, you’re likely required to make four payments per year.
Miss Q2 estimated tax deadline doesn’t trigger an audit or a collection notice, but it does trigger a penalty calculation that starts the day the payment was due.
When is The Q2 Estimated Tax Deadline?
The Q2 estimated tax payment is due June 16, 2025, because June 15 falls on a Sunday this year.
That’s the date the IRS uses as the starting point for calculating any underpayment penalty, so it matters whether you paid on June 13 or June 23, even if both feel like “June.”
One thing that surprises people every year: estimated tax deadlines do not follow the same extension rules as your annual return. Filing an extension for your personal or business return does nothing for your quarterly payments.
Those four due dates (April 15, June 16, September 15, January 15) are fixed, and the IRS doesn’t move them for anyone except when they fall on a weekend or federal holiday.
What Penalty Does the IRS Charge for a Missed Estimated Tax Payment?
The IRS underpayment penalty for 2025 is 8% annualized, calculated daily on whatever you owe from the missed due date until the date you actually pay (or until December 31 of that tax year, when the annual return math takes over).
That rate is tied to the federal short-term rate plus 3 percentage points, and it adjusts quarterly, so it’s worth confirming the current rate at IRS.gov.
Let’s look at an example.
Say you owed $3,000 for Q2 and missed it by 30 days. At 8% annualized, you’re looking at roughly $20 in penalty. That’s not catastrophic. But if you missed Q2 and Q3 and didn’t reconcile until you filed in April, the penalty can start to add up into the hundreds. The math gets worse the longer it sits.
This isn’t a penalty the IRS sends you a separate bill for. It shows up on Form 2210, which gets calculated when you file your return. If you pay late and your return is correct, you’ll see it as a line item.
If you don’t file Form 2210, the IRS calculates it for you, and their version is rarely in your favor.
Does the IRS Waive the Penalty If You Have a Good Reason?
The IRS does grant penalty waivers in certain situations, but “I forgot” or “it was a busy season” doesn’t qualify.
The main scenarios where a waiver is available include a casualty, disaster, or unusual circumstance that made paying impossible, or if you retired or became disabled in the current or prior tax year, and the underpayment was reasonable.
There’s also an automatic waiver if your total tax liability for the year is under $1,000. Below that threshold, the IRS doesn’t charge an underpayment penalty at all, so if you’re a newer business with a small first-year tax bill, you may not owe anything even if you skipped a payment.
If you think you have a legitimate waiver case, Form 2210 Part II is where you make that argument. It’s one of those forms where having someone in your corner who knows the rules is genuinely worth it, because the IRS isn’t going to volunteer that you qualify.
What is the Estimated Tax Safe Harbor, and Does It Protect You?
The safe harbor rule is the cleanest way to avoid underpayment penalties without having to predict exactly what you’ll owe.
There are two versions: pay at least 90% of your current year tax liability across your four payments, or pay 100% of what you owed last year (110% if your prior year adjusted gross income was over $150,000). If you hit either of those targets, the penalty goes away even if you end up owing a balance in April.
The 110% rule catches a lot of Cape Cod business owners off guard, especially those who had a strong prior year and assume last year’s payment amount is enough. If your AGI was above $150,000 in the prior year, you need to overshoot by 10% to stay protected. It’s a small thing that can mean a meaningful difference in what you owe come April.
Understanding the safe harbor is one of the most practical pieces of Cape Cod taxes planning we walk people through, especially for seasonal businesses where income swings a lot year to year.
What Should You Do Immediately after missing the Q2 deadline?
Pay what you owe as soon as possible.
The penalty accrues daily, so every week you wait adds a small but real cost. You can make an estimated tax payment online through the IRS Direct Pay tool or EFTPS (Electronic Federal Tax Payment System), and the payment posts the same day.
Once you’ve paid, recalculate where you stand for Q3 (due September 15). Missing Q2 and then getting Q3 wrong, too, is how people end up with a real headache in April. If your income this year is higher than last year, use the 90% of the current year method to set your Q3 and Q4 payments. If your income is unpredictable (hi, Cape Cod seasonal businesses), the 100%/110% of prior year method is simpler to execute and still gets you penalty protection.
Also, pull together your year-to-date income and expenses now, not in March. Getting your books current in June means your Q3 estimate is based on real numbers, not guessing.
How do Seasonal Businesses on Cape Cod Handle Uneven Income and Quarterly Payments?
Seasonal businesses have a harder time with estimated taxes than anyone, because the standard method assumes your income is roughly equal across four quarters, and that’s almost never true on the Cape.
A restaurant or retail shop might earn 60-70% of its annual revenue between Memorial Day and Labor Day, which means Q2 and Q3 payments look enormous compared to what’s coming in Q4 and Q1.
The IRS does allow something called the annualized income installment method, which lets you base each quarterly payment on the income you actually earned in that period rather than assuming even distribution.
It requires more calculation, and you need to file Form 2210 Schedule AI, but it can significantly reduce what you owe in the slow quarters. It’s not a trick; it’s an official IRS method that most seasonal businesses never hear about.
Let’s look at an example.
A Cape Cod landscaping company earns $180,000 in revenue but $140,000 of it comes in Q2 and Q3.
Under the standard method, they’d owe the same estimated payment every quarter. Under the annualized method, their Q1 and Q4 payments drop to reflect the slower season, and the bigger payments land when the cash is actually there.
That’s the kind of planning that keeps a seasonal business’s cash flow from getting squeezed in February.
Can You Still Avoid a Penalty If You Already Missed Q2?
Yes, in some cases. If you pay enough in Q3 and Q4 to hit the safe harbor thresholds by year’s end, the penalty on the Q2 shortfall may be reduced or eliminated, depending on how the IRS calculates the annualized totals.
It’s not automatic, but it’s worth running the numbers before you assume you’re stuck with the full penalty.
The cleanest path is to pay Q2 as soon as possible, catch up on Q3 if needed, and work with your CPA to project Q4.
If the total penalty for the year is under $100, the IRS often doesn’t bother collecting it, though that’s not a rule you should count on. Form 2210 is your friend here. It’s also the place where, if you qualify for a waiver, you make that case formally.
If this is your first year with a real estimated tax obligation (maybe you went out on your own, or picked up a side business this year), it’s also worth knowing that the IRS offers a first-year underpayment waiver if you meet certain conditions.
Ask us about it when we sit down to do your quarterly review.
What Does This Mean For Your Annual Return in April?
A missed Q2 payment doesn’t mean you’ll owe a huge balance in April. What it means is that your April filing will include a Form 2210 calculation, and any underpayment penalty will show up there as a line item. If you’ve been making Q3 and Q4 payments correctly and hit the safe harbor by year end, the penalty may be small. If you’ve missed multiple quarters, April gets more complicated.
One thing people don’t realize: you can ask your employer to increase withholding from a W-2 job to cover a shortfall from self-employment income.
Withholding is treated as if it were paid evenly throughout the year, so increasing it in the second half of the year can actually reduce or eliminate the Q2 penalty retroactively in the IRS’s calculation. If you have both a job and a side business, this is a move worth knowing about.
We cover a lot of this ground in our posts on small business tax planning for Cape Cod, and if you’re running a seasonal business, our monthly bookkeeping service keeps your numbers current, so these calculations aren’t a fire drill every quarter.
Missing the Q2 deadline is more common than people think, especially on Cape Cod, where summer hits fast, and the business side of things can fall behind the operational side.
The penalty is real but manageable, and the sooner you pay and recalibrate, the better position you’re in for the rest of the year.
If you want to walk through where you stand, reach out to our office, and we’ll sit down and run the numbers with you.
If you liked this one, you might also like our guide to quarterly tax planning for Cape Cod seasonal businesses on the blog.
Until next time!
Common Questions
How much should a small business owner pay themselves?
There is no single number that works for every owner. The right pay depends on your business structure, your profit margin, your cash flow, and the IRS reasonable compensation rules if you run an S corporation. A common starting point is to take a draw or salary equal to roughly 30% to 50% of stable monthly net profit and adjust from there as cash flow and growth allow.
How does business structure affect owner pay?
Sole proprietors and single-member LLCs take owner draws (no salary, no payroll). Partnerships and multi-member LLCs use guaranteed payments or distributions per the operating agreement. S corporations require the owner to take a reasonable W-2 salary first, then take the remainder as distributions. C corporations pay shareholders through salary and dividends. Each structure changes the tax math.
What does the IRS mean by reasonable compensation?
For S corporation owners, the IRS requires a wage that reflects what a comparable role would earn in a comparable market. Factors include your duties, your industry, your geographic market, the size of the business, and what you would have to pay a non-owner to do the same work. Underpaying yourself to dodge payroll taxes is a top S-corp audit trigger.
Should I take a salary or an owner’s draw?
It depends on entity type. If you’re a sole proprietor or single-member LLC, you take draws, not a salary. If you’re an S corporation, you must run a W-2 payroll for yourself and pay reasonable compensation; you can also take distributions on top of that. Your CPA should help you set the right mix.
When should I review my owner compensation?
Review at least once a year before tax planning season, and again any time revenue or profit shifts meaningfully. Big jumps in profit, a new product line, a change in business structure, or a planned exit are all triggers for revisiting your salary versus distribution mix.
About the Author
Steven M. Ellard, CPA is the founder of Steven M. Ellard, CPA, a Brewster, Massachusetts public accounting firm serving small businesses, restaurants, healthcare practices, homeowners associations, and individuals across Cape Cod, the South Coast, and Greater Plymouth. The firm provides monthly bookkeeping, payroll, individual and business tax preparation, QuickBooks cleanup, business foundation services, and outsourced CFO and advisory work. Meet the team or get in touch.