From the desk of STAC Bizness Solutions CEO, Shawna Aho

Owning and running a dental practice is one of the most rewarding career paths. You get to provide care that transforms lives while also creating a business that supports your family and staff. But with that opportunity comes a wide range of financial responsibilities that go far beyond paying rent and payroll. One of the most misunderstood, and often neglected, responsibilities of dental practice owners is managing estimated taxes. Unlike employees who have taxes automatically deducted from their paychecks, practice owners are largely on their own when it comes to paying taxes on the income they generate. This is where estimated taxes come in—and they’re critical to understand if you want to avoid large tax bills and penalties down the road.

Many dental practice owners, especially those who are newly self-employed or recently transitioned into ownership, may not realize that the IRS expects them to pay taxes throughout the year as income is earned—not just when filing an annual return. This requirement is often confusing because it operates differently than what most people experienced as employees. So, in this article, I will break down exactly what estimated taxes are, why they matter, how to know if you’re required to pay them, how to calculate them accurately, and what happens if you don’t. I’ll also explore strategies to ensure you never fall behind, so taxes don’t become a stressful part of running your practice.

What Are Estimated Taxes and Why Do They Matter?

At its core, estimated taxes are periodic payments you make directly to the IRS to cover the income taxes and self-employment taxes you owe on money that isn’t subject to withholding. As a dental practice owner, much of your income—whether it’s business profits, partnership income, or distributions from an S-corporation—is earned without anyone withholding taxes from it along the way. Because the U.S. tax system is built around the concept of “pay-as-you-go,” the government expects you to pay taxes on this income as it comes in, rather than waiting until you file your return the following April. If you wait too long, you could find yourself facing significant penalties and interest, even if you eventually pay your full tax bill.

Estimated taxes also matter because they cover not just regular income taxes, but also self-employment taxes, which include Social Security and Medicare contributions. For practice owners operating as sole proprietors or partners, these self-employment taxes are substantial—amounting to 15.3% of net earnings. Even for S-corporation owners who take a salary and pay employment taxes through withholding, any additional profit distributions typically require estimated tax payments because no taxes are withheld from those amounts.

Are You Required to Pay Estimated Taxes?

The short answer is that if you are a profitable dental practice owner, you probably are required to pay estimated taxes. According to IRS guidelines, if you expect to owe at least $1,000 in taxes when you file your return—after accounting for any withholding and tax credits—you are required to make estimated tax payments throughout the year. Most practice owners easily meet this threshold.

If you’re operating as a sole proprietorship, everything you earn beyond your deductions is subject to both income and self-employment tax. If you’re in a partnership, the profit allocated to you via Schedule K-1 will flow to your personal tax return, and you’ll need to pay tax on it even if you don’t physically take a distribution. For S-corporation owners, although you may draw a salary from which taxes are withheld, profits passed through to you are not subject to automatic withholding and will require estimated tax payments.

Additionally, if you had a sizable tax bill when you filed your return last year, and you expect this year to be similar or more profitable, estimated taxes are definitely something you need to plan for. Otherwise, you’ll be subject to underpayment penalties and interest charges when you file.

Managing Estimated Taxes Effectively

The best way to manage estimated taxes is to make them part of your practice’s regular financial management routine. Instead of scrambling to come up with large sums every quarter, a good strategy is to set aside a percentage of each month’s revenue specifically for taxes. Many practice owners set aside between 25% and 30% of net income in a separate savings account. This approach ensures that when estimated tax payments are due, the funds are already available, and there’s no disruption to cash flow.

Additionally, reviewing your practice’s finances quarterly with your advisor is essential. Your income may fluctuate throughout the year due to changes in patient volume, insurance reimbursements, or staffing, so adjusting your estimated payments to reflect actual income can keep you in compliance and avoid overpaying or underpaying.

Final Thoughts: Take Control of Estimated Taxes to Support Your Practice’s Success

For many dental practice owners, estimated taxes are an afterthought—something they only think about when they get a surprise bill or penalty from the IRS. But treating estimated taxes as part of the routine financial health of your practice can prevent that stress and help you stay in control. By planning ahead, working with a knowledgeable advisor like STAC Bizness Solutions, and regularly setting aside funds, you can handle estimated taxes with confidence and focus on what you do best—running a successful dental practice and caring for your patients.

Should you be paying estimated taxes… and if so, how much?  Contact us online or call us at 844-424-9637 for a free initial consultation.