Quarterly Estimated Taxes: A Survival Guide for the Self-Employed

W-2 employees have taxes withheld automatically. Self-employed people do not — and the IRS expects payment as you earn, not just on April 15. Miss the quarterly deadlines and you owe an underpayment penalty even if you pay in full at year-end.

• The four deadlines.
• Two ways to calculate. Safe harbor (easiest): pay 100% of last year's tax (110% if AGI was over $150k), divided into four equal payments. As long as you hit this, no penalty — even if you actually owe more.
• How to actually pay. Set up an IRS Direct Pay account (free) or use EFTPS.

Frequently asked questions

What percentage should I save?

Most service businesses set aside 25–30% of profit (revenue minus expenses). Higher earners or those in high-tax states should target 35%.

What is self-employment tax?

15.3% on net earnings — covers your Social Security and Medicare. It is on top of federal income tax.

What happens if I miss a quarter?

You owe a small underpayment penalty (currently ~8% annualized on the shortfall). Pay as soon as you can to stop it accruing.

More taxes guides

• Sales Tax for Service Businesses: A Plain-English Guide
• Sales Tax Nexus: When You Owe Tax in Another State
• Resale Certificates: When and How to Use One
• Self-Employment Tax: What It Is and How to Reduce It
• How Much to Set Aside for Taxes (and Where to Put It)
• Schedule C Deductions: The Master Checklist for Service Businesses