Quarterly estimated taxes: how much to set aside, and when

If you have only ever been an employee, tax is something that happens once a year, in April, and mostly happens to you. Working for yourself changes that, and plenty of people find it out the hard way, which is to say in April.

The IRS expects you to pay as you go, in four installments across the year. Miss them and you can owe a penalty even if you pay every dollar you owe by the filing deadline. So here's what to hold back, and when it's due.

The four dates

For federal taxes the deadlines are April 15, June 15, September 15, and January 15 of the following year. They aren't evenly spaced, which catches a lot of people out: there are only two months between the first payment and the second, but four between the third and the fourth. When a date lands on a weekend or a legal holiday it moves to the next business day, and the quarterly tax due dates page lists the exact dates with a countdown to the next one.

Each payment covers the stretch just before it. The September 15 payment, for example, covers what you earned in June, July, and August, and the January one covers September through December.

What percentage to hold back

The rule of thumb you'll hear is 25 to 30 percent of your profit. That's a reasonable place to start, and it helps to know where the number comes from.

Two separate taxes stack on self-employment income. The first is self-employment tax, which covers Social Security and Medicare. It runs 15.3 percent, charged on 92.35 percent of your net profit. The Social Security piece stops once you've earned $184,500 in 2026; the Medicare piece never stops. The second is ordinary income tax, which depends on your bracket, your filing status, and your standard deduction.

There's one bit of good news buried in that: half of your self-employment tax is deductible, which takes some of the sting out of the income-tax side.

If you'd rather have your actual number than a percentage, the free tax estimator here takes your net profit and filing status and works it out. It covers federal figures only, so if your state taxes income you'll need to add that on top.

The safe harbor, which is the part worth knowing

You don't have to predict this year perfectly, and I think this is the most useful thing in the whole post. The IRS gives you a safe harbor. Pay at least 100 percent of what you owed last year, split across the four payments, and you generally won't face an underpayment penalty, even if you end up earning far more than you expected. If your adjusted gross income last year was above $150,000 ($75,000 if married filing separately), that bar is 110 percent instead.

That's really helpful when your income is lumpy, which for most contractors it is. Take last year's total tax, divide by four, pay that. You might still owe a balance in April, but you've avoided the penalty.

The part that makes all of this easier

Every number above rests on knowing your profit, and knowing your profit means knowing your expenses. If your deductions are spread across a shoebox and three bank statements, your estimate is a guess with extra steps.

That's the problem Whittle exists to solve. Log expenses as they happen and your profit is something you look up in September instead of reconstructing. On a paid plan the reports page will also show you a single calendar quarter, which is a quick way to see how the year is running before each payment is due. If you're starting from nothing, the free plan is enough to build the habit.