The Optometry Money Podcast Ep. 159: How to Stop Scrambling at Tax Time – An Optometrist’s Guide to Quarterly Tax Payments

Evon: [00:00:00] Hey everybody. Welcome back to the Optometry Money podcast. We’re helping ODs all over the country make better and better decisions around their money, their careers, and their practices. I am your host, Evon Mendrin, Certified Financial Planner (TM) practitioner, and owner of Optometry Wealth Advisors, an independent financial planning firm just for optometrist nationwide.

And thank you so much for listening. Really appreciate your time. Your attention today and this episode should be going live on April 15th, 2026, which means that today is. Tax day and we are either very excited to have that done. We’ve got our tax returns finished or we’re very apprehensive ’cause we’re still working on paying last year’s tax bill.

or we’re still unsure because we are filing that extension. And haven’t quite filed their tax returns just yet, but regardless of where you stand, [00:01:00] it’s very likely tax payments are on your mind because today is the deadline to pay the tax due for 2025 tax return.

Even if we file that extension, you’re still gonna have to pay that anticipated tax due. but it’s also the, it’s also the deadline for the first. Quarterly tax payment of 2026. So whether it’s for 2025 or now, planning for the rest of the year, we’re gonna be making some tax payments by today and it’s tax payments that I wanna talk about today.

I wanna give you a framework for planning around quarterly estimated tax payments so you’re not scrambling or stressed or surprised at tax time or at least try to. Reduce that stress because this isn’t the most exciting topic, but it’s one of the most common sources of frustrations I see.

Optometrists who are surprised by what they owe or who are caught in a cash crunch situation because they didn’t quite Have their payments in line ahead of time. We’re just totally [00:02:00] uncertain about how much they should be paying through the year. So let’s fix that. Let’s have a conversation around tax payments.

How Do Optometrists Make Tax Payments Through the Year?

Evon: And the first thing to discuss is where do our tax payments come from? the USA Federal Tax System is a pay as you go tax system, meaning you are expected to pay through the year as you Earn your income. Not all at once in April. And there are two ways to do that. the first way is through payroll withholdings.

And so if you are, if you have a salary, W2 income, whether you’re an employed optometrist or whether you are the owner of an S corporation, a business that’s taxed as an S corp, you’re paying yourself a salary. So taxes are withheld automatically from your pay, from your paychecks. So federal states, state, if you have it, even social security and Medicare taxes, those are all automatically withheld based on withholding tables.

And of course you can adjust the amounts withheld. But those are one of the levers to use. And what’s great about payroll [00:03:00] withholdings is that it’s considered by the IRS to be withheld evenly throughout the year, even if it all happens in December.

Which can open up some opportunities later in the year if needed.

And, I’ve seen it happen where we need to increase a practice owner’s wage by the end of the year, maybe to get them more in line with a re a reasonable wage for what they’re doing or to increase profit sharing contributions or for, 401k contributions.

And at times they’ve also needed to make a big increase to their. tax withholding. I’ve seen them put most or all of that last year’s payroll run, towards taxes. And that’s perfectly legitimate. this is also the case if you’re withholding from retirement account withdrawal.

So if you are. looking forward to the time where you’re in retirement. When you withdraw from those accounts like a traditional IRA for example, you can withhold from those withdrawals. You can set your withholding percentages and this can also create some end of year tax payment opportunities when you’re in a bench using those retirement accounts.[00:04:00]

So payroll withholdings, or just withholdings in general are one way. The second way we make payments are through quarterly estimated tax payments, and these payments are due on, the 15th of April, June, September, and January. And we call them quarterly, they don’t exactly line up with the quarters, of the calendar year.

but there are four payments due generally on the 15th, and these are payments you make directly to the IRS. There’s no payroll involved and potentially your state if you have to worry about state taxes. for income that isn’t covered by payroll withholding. So things like practice profit above your S corp salary or all of your income if you’re a sole, if you’re taxed as a sole proprietor or a partnership, or if you had a substantially large , capital gain throughout the year, something like that.

So it’s for that, it’s for those sources of income. You’ll make those quarterly payments and. Which one applies to you? Again, depends on how you are working or practicing. If you are an employed associate, you’re gonna be using payroll withholdings unless you [00:05:00] have a substantial, odd source of income.

Outside of that, maybe rental income, of net rental profit, I should say, or, or like a very large capital gain or something like that. If your business is taxed as a sole proprietor or a partnership, there’s no payroll for yourself. So you’re gonna be relying on quarterly estimated payments.

Keep in mind in this case and for you, 1099 optometrists out there, you’re also setting aside dollars for those self-employment taxes, that 15.3% self-employment tax for Social security and Medicare. Keep that in mind as well.

And if you are the owner of a business that’s taxed as an S corporation, we’re gonna have a combination of both.

You’re gonna have W2 withholdings and you’re gonna have, potentially estimated payments on top of that for the profit, and. as a reminder, as you file your taxes, what’s important is total household payments, and withholdings, right? It’s your total amount that you’ve paid in throughout the year, across all the sources of income.

So if you have two spouses working, it’s both of your [00:06:00] paychecks. if you’re doing payroll, withholdings, and estimated tax payments, it’s gonna look at all, it’s gonna look at your, when you filed your return, it’s gonna show your total tax. And then it will show your total payments through withholdings as well as quarterly payments.

And one thing to mention about those quarterly payments is they do need to be on time, right? So there’s potentially a late, late payment penalty if you’re making them past those 15th deadlines.

However, if you have very uneven income throughout the year, maybe you had a very light early half of the year and you weren’t sure that you had to be making estimated payments again, particularly in, in early in practice ownership, but then a very strong later in the year. Um, there is a method for your tax professional to use in IRS form 2210 and to annualize your income throughout the year.

So basically accounting for the income that actually shows up in each quarter to line up your payments with that income. So talk with your tax Pro about potentially using that method if you need to.

So we know the two [00:07:00] ways that we pay income taxes throughout the year.

How Do Optometrists Know to Make in Quarterly Tax Payments

Evon: how much should we pay? This is usually the question that comes up. How much should we be withholding or paying each quarter? and there are two levels of, there are two levels of planning here. the first level is what is, our ideal target for the year. And, our ideal target is that we’re gonna get you to as close as a $0 tax due as possible at the end of the year, meaning when you file your tax return, And we look at your total tax after all your tax credits. we want to have you paid in through the year, roughly what you’re gonna owe. There’s no massive tax bill or no massive refund. a big refund means that you’ve dramatically overpaid and you’ve lent the government essentially your money interest free throughout the year.

Well, that’s money that could have been in your own savings account or your own practice or investment or whatever it is. on the other hand, a big tax bill means you’ve underpaid. Now you could be potentially scrambling for cash. And potentially facing penalties and seeing the stress of that. And [00:08:00] so for our clients, what we are doing, generally speaking, we’re running tax projections throughout the year, coordinating really closely with tax professionals and adjusting withholdings and estimated payments as your income unfolds.

So it’s a living, breathing process. We can tax plan proactively and try to plan as close as we can to, to our anticipated. An anticipated tax. Now the problem is, especially for practice owners, is we don’t always know what your total income will be for the year. for a variety of reasons.

Income can change throughout the year, a month to month, and it can look very different from the year before. it could be that your income is simply growing, right? Your practice is growing more quickly than we anticipated, or you have an unusual large capital gain or something like that, a large sources of income in that year.

or you may have lower deductions, you may have less expenses, so you may have less depreciation, for example, than you have in the years past. Particularly for you, early practice owners So for those of you who have just purchased a practice or just cold [00:09:00] started a practice, there is this timeframe, in year like three to five, where your income is growing, so your gross income is growing, you’re seeing more patients, but also your expenses are tapering down a little bit.

All of that early depreciation from Either the purchase of the practice and all the assets of the business like, like equipment or from cold starting, all of that depreciation might be starting to taper down and And so your taxable income now is starting to rise and be quite a bit more than it was previous years.

And so if you’re not ready for that, if you’re not prepared for that, where that’s an example of where the stress and frustration can come from

What Are the IRS Safe Harbors for Tax Payments?

Evon: and so when we’re seeing uncertain income, the IRS gives us a few targets to aim for, which they call safe harbors.

Which leads us to goal number two, which is avoiding under withholding penalties. And these are targets where if you pay into the system at least a certain [00:10:00] amount through the year, you won’t have to face under withholding penalties. And there’s three of ’em. There’s three safe harbors.

And so the number one is that. If when you file your tax return, you owe less than a thousand dollars of, of tax due, then you don’t have to pay an under withholding penalties. Now, that’s hard to plan for specifically, but it’s worth knowing.

The second safe harbors that you’ve paid at least 90% of the current year’s total tax.

This kind of requires that you have a reasonable, accurate projection of what you’ll owe for the year, which can be a moving target if your income is fluctuating, but 90% of the current year’s total tax is another one to consider. The third one is that you’ve paid at least. A hundred percent of last year’s total tax.

And this is often the easiest to plan around because the number’s already known. You can pull up last year’s tax return, o n page two of the 1040 ook at the line item that shows you the total tax and then plan around that. Okay.

[00:11:00] look at the line item that shows you the current tax and and then plan around that. Now, one caveat that most ODs are gonna see is that if your adjusted gross income, your AGI on the last year’s tax return was $150,000 or more, if you’re Married filing jointly.

Evon: that threshold bumps up to 110%.

If you’re married fighting separately, then it’s 75,000.

So for most of you, it’s gonna be 110% of last year’s total tax,. So which one do you choose? Well,the thing I should say is that you should talk to your tax professional and your financial professionals, and figure out which makes the most sense for you. Generally speaking, if your income is expected to be roughly the same or more than last year, meaning like your profit, your, your income, that’s gonna show up on your tax return, then generally speaking, 110% of last year’s total tax.

It’s gonna be your simplest, most reliable target. This is what a, a lot of times when your tax professional gives you your tax [00:12:00] return, and they show you your projected estimated tax payments, those suggested payments. are usually based on this approach, right? They’re usually looking at last year’s total tax, multiplying it by 110% if it needs to be subtracting out the withholdings and those are your quarterly payments.

So if you’re expecting roughly the same or growing net income as last year, taxable income as last year, You might consider using that method.. If you know your income is gonna be much lowered this year, maybe you lost an associate, maybe you reduced your hours, maybe you had an unusual source of income last year, like a large capital gain that’s not gonna continue on in the future.

then 90% of the current year’s tax might make more sense, but. You’re gonna wanna work with your Advisors to project that out.

And then as you go through the year, you can update projections. You can look at your actual practice profit. You can look at your actual income from employment throughout the year and make adjustments as you go. we can adjust things as we go. [00:13:00] So those are our targets that you can use as a starting point, especially right as you file your tax return in April or earlier in January if you’re starting this early.

How Optometrists Can Automate Setting Aside Tax Payments

Evon: but how do we actually do this in practice? Because knowing your target is number one. The harder part I think for most ODs is actually having the cash available when the payment is due. And this is a cashflow problem. And the fix, I think is relatively simple. number one,it’s calculating your estimated tax payments for the year.

This is either you can. if it’s accurate, you can look at that suggestion from your tax professional. Maybe they’ve done the work for you, but if not, what you can do is you can pick which safe harbor target you’re going for. So you know, for example, you can look at last year’s total tax if you need to take 110% of that, and that’s your annual target for the year.

Now you can subtract out your expected withholdings through your payroll. So if you have a pay stub that you’re withholding from, you can look at. You can look at your most recent pay stub. Look at how [00:14:00] much federal tax is going,is being taken out each pay stub.

And as long as you don’t expect any major changes throughout the year to your, to your salary, you can multiply that tax amount by however many pay stubs are in the year. So for example, if it’s 26, multiply that by 26, and then that’s your total withholding amount through pay stubs.

And then subtract that from your target amount and whatever’s left over is the amount you need to cover through estimated tax payments. So for example, if last year’s total tax was a hundred thousand dollars. 110% of that is $110,000. Let’s say you knew you were gonna withhold $20,000 of tax in your payroll.

So if you subtract out $20,000 from that total, that leaves you with $90,000 of tax to cover through the rest of the year. that’s the amount you’re gonna do for quarterly estimated payments, and then divide that by four. That’s your quarterly amount, then what you wanna do is you wanna set up a dedicated tax account.

So this is [00:15:00] a dedicated savings account. You’re either gonna open up through the practice or personally in the household. And each quarter I want you to automate those deposits from your bank account, from your practice or from your checking account into that tax account.

And treat this as an automatic expense that should happen before you are distributing additional dollars to yourself.

If we think about our basic sort of cashflow operations, first, we wanna make sure we’re covering all of our operating expenses in the practice. Of course, we wanna make sure we can cover our debt payments in the practice as well. Next, we wanna make sure that we are setting aside enough for taxes, and then finally, if we still have enough cash in addition to our planned cash buffer amount in the practice, then we have an idea of what’s available to distribute, what we wanna tackle this tax payment before we start distributing dollars to yourself out of the practice.

And that account is sacred, it doesn’t belong to you anymore. It belongs to the IRS or your state tax authority. So that you’re not grabbing that money for [00:16:00] operating expenses in the business or for spending in the household.

If it’s done through the practice, what you’re gonna see, because that’s a personal tax payment, it’s not a business tax payment, like a pass through entity tax payment would be. Because those usual quarterly payments are personal tax payments. You’re gonna see that show up as a distribution in your accounting.

it’s not gonna be a, it shouldn’t be a business expense. Now that states pass through entity tax payment’s different, it, that is a business expense, but that’s not what we’re talking about here. and so, you can automate that quarterly deposit into that tax account.

And if you wanna break it down monthly, you can also break that down into a monthly amount and, and make those deposits monthly Now. we’re already in April, right? So you’re not gonna be able to break that down monthly for April’s payment. And each payment isn’t necessarily a three month quarter, right?

they’re, each one’s a little bit different. So the monthly amounts can get a little weird, but, but you can do that way if you want.

And then through the IRS website, so either through the [00:17:00] IRS direct pay or through the EF TPS, portal, you can log into, you can make those payments online or you can, using that tax account, or you can even automate and pre-schedule those quarterly payments. and then for, and then for state taxes, check with your tax professional and your state tax authority on what they’re gonna want from you, but. the essence here is that you have a separate account just for tax payments and you automate deposits into that account so that it reduces the risk of forgetting those payments.

It reduces the risk of getting behind. You’re just automating this whole process. Because the worst scenario is getting really behind by tax time, having made Maybe no payments at all, and now you owe a full year’s tax bill, plus your quarterly yesterday payment for the new year.

That’s a really stressful time. And you may have to do like , installment plan, and it can just get really stressful from a cash flow perspective. So the more you can think ahead, the more you can automate this. The more you can figure that out as you go.

And then for us, for clients, like we’re running [00:18:00] those projections, we’re keeping in touch with their tax professionals and we’re at making adjustments as we go. And as your income unfolds, if you are expecting, if you have higher income, then you’re, than you have already expected, then you can simply increase the amount that you set aside into that tax account.

And you can choose whether you wanna increase your quarterly payments or not. as long as you’ve hit those safe, as long as you’ve hit those safe harbors and you’re making those quarterly payments on, on time, you aren’t gonna have to worry about under withholding penalties.

So it’s really just about preparing for the following tax time and making sure you have the total amounts of cash necessary to pay those bills.

Recapt for Optometrists

Evon: so a quick recap. We know how we’re making, tax payments, whether it’s through paywall or whether it’s quarterly payments.

we have at least minimum targets to shoot for at least early in the year where the rest of the year’s uncertain. And it’s those safe harbors that we talked about. and then we wanna automate those deposits into a sacred set aside tax account that’s only there to make those [00:19:00] tax payments.

And good proactive tax planning, projecting your taxes, adjusting as we go, looking for opportunities to make good tax decisions throughout the year. Coordinating between your different professionals, like that’s how you move from being really reactive to feeling in control.

And I think what is just super important is proactive communication with your professionals. Let them know when you’re making those big investments in the practice, or you’re opening up a second location or buying that real estate property, let them know when there’s changes in your life when you’re getting married.

If you’re seeing massive swings in profit or gross revenue, keep that communication with your professionals so they can update their assumptions, and give you good advice throughout the year.

And hopefully this conversation is helpful for you as you go through 2026 if you’re an optometrist or practice owner.

And if you’d like, help with more proactive planning in your life.

Evon: I’d love to chat. you can schedule a no commitment intro call, through the link in the show notes, or you can go to www.optometrywealth.com [00:20:00] and we can talk about where you’re at right now and the financial decisions on your mind, and we can share how we help Optomest navigate those same things all over the country. Thanks for listening. If this was helpful, share with a colleague who might need to hear it and we’d be honored if you can leave a review as well, wherever you listen to podcasts, but we’ll catch you on the next episode.

In the meantime, take care.