Quarterly estimated taxes: a plain-English guide for 1099 earners

When you work as an employee, taxes come out of every paycheck and you barely think about them. The day you start invoicing clients instead, that stops. The IRS still expects to be paid as you earn — it just expects you to send the money yourself, four times a year.

Miss those payments and you'll owe an underpayment penalty, even if you pay the full balance in April. Pay too much and you've lent the government money for free. Here's how to get it right.

Who has to pay estimated tax

The general rule: if you expect to owe at least $1,000 in federal tax for the year after subtracting withholding and refundable credits, you should be making estimated payments. That usually includes:

• Independent contractors, freelancers and consultants paid on 1099s
• Sole proprietors and single-member LLC owners
• Partners and S-corporation shareholders who take distributions
• Professionals with a W-2 job plus meaningful side income, rental income or investment gains

Most states with an income tax have their own estimated-payment rules on a similar schedule. Don't forget them.

The four deadlines

Notice the "quarters" aren't equal — Q2 is only two months long, which catches many people off guard. When a deadline falls on a weekend or federal holiday, it moves to the next business day.

How much is enough

You avoid the underpayment penalty if your withholding plus timely estimated payments equal at least the smaller of:

• 90% of this year's tax, or
• 100% of last year's tax — or 110% if last year's adjusted gross income was more than $150,000 ($75,000 if married filing separately).

The prior-year option is called the safe harbor, and it's the simplest path for anyone whose income is growing. Take last year's total tax, multiply by 110% if you're a higher earner, divide by four, and pay that each quarter. You may still owe a balance in April, but you won't owe a penalty on it.

If your income is lumpy — a big contract lands in November, say — the annualized income method lets you match payments to when you actually earned the money, so you aren't penalized for "underpaying" in quarters when you earned little.

Don't forget self-employment tax

Employees split Social Security and Medicare taxes with their employer. When you're self-employed, you pay both halves: 15.3% on roughly 92% of your net earnings. The Social Security portion stops at the annual wage base — $184,500 for 2026 — but the 2.9% Medicare portion doesn't, and an extra 0.9% Medicare tax applies above $200,000 of earnings ($250,000 for joint filers).

That's why the common rule of thumb for 1099 earners is to set aside 25% to 35% of every payment you receive. Where you land in that range depends on your bracket, your state and your deductions.

A simple system that works

1. Open a separate savings account just for taxes, and move your set-aside percentage there every time a client pays.
2. Use the safe harbor as your floor. Calculate it once in January and schedule four payments.
3. Check in mid-year. If income is running well ahead of last year, bump up the Q3 and Q4 payments so April isn't a shock.
4. Pay online. IRS Direct Pay, your IRS online account or EFTPS all give you a confirmation to save. Mail is slower and harder to prove.
5. Keep the confirmations. Estimated payments are one of the most common things to get lost between you and your preparer.

If you have a W-2 job too, there's another option: increase your paycheck withholding. Withholding is treated as if it were paid evenly through the year, no matter when it happened — a useful way to catch up late in the year.

This is exactly what our Estimate Engine does: it recalculates each payment from your year-to-date books, compares it to your safe harbor and sends you the number two weeks before it's due.