Quarterly estimated taxes for self-employed contractors, explained

When you worked for someone else, tax came out of every paycheck. When you work for yourself, nobody withholds anything from the money customers pay you. The IRS still wants its share as the year goes, not in one lump the following April. That is what estimated tax is: you send in payments during the year to cover income tax and self-employment tax on business profit.

Figures below come from the IRS's 2026 Form 1040-ES and its self-employment tax pages, as read in October 2026. The worked examples use made-up numbers. Everything here covers federal rules only and is not tax advice. An accountant who knows your full return should set your actual payments.

Who has to pay estimated tax?

For 2026, Form 1040-ES says that in most cases you must pay estimated tax if both of these apply:

1. You expect to owe at least $1,000 in tax for 2026 after subtracting withholding and refundable credits.
2. You expect your withholding and refundable credits to be less than the smaller of 90% of the tax on your 2026 return or 100% of the tax on your 2025 return (which must cover all 12 months).

There is an exception: you do not have to pay estimated tax for 2026 if you were a US citizen or resident alien for all of 2025 and had no tax liability for the full 12-month 2025 tax year. That often applies to someone in their first profitable year after a year with no tax due. It does not mean you will owe nothing in April; it means the penalty rules work differently.

The rules above are for individuals: sole proprietors, single-member LLCs taxed as sole proprietorships, and partners. If your company is taxed as a corporation, different rules apply; corporations generally must pay if they expect to owe $500 or more, per the IRS's estimated tax page.

When are the 2026 payments due?

The periods are not equal quarters: the second payment covers two months and the fourth covers four. Form 1040-ES also says you do not have to make the January 15, 2027 payment if you file your 2026 return by February 1, 2027 and pay the full balance with it. If a due date falls on a weekend or legal holiday, the next business day counts.

What is self-employment tax?

Self-employment tax is Social Security and Medicare for people who work for themselves. The IRS sets the combined rate at 15.3%, made of 12.4% Social Security and 2.9% Medicare. An employee pays half of that through withholding and the employer pays the other half. When you are self-employed, you pay both halves.

Key details:

• Threshold: you file Schedule SE if your net earnings from self-employment were $400 or more.
• Base: Form 1040-ES tells you to use 92.35% of your net profit from self-employment when estimating net earnings.
• Cap: the Social Security part stops at the wage base. For 2026, Form 1040-ES puts the maximum earned income subject to Social Security tax at $184,500, counting wages and self-employment earnings together. The Medicare part has no cap.
• Additional Medicare tax: 0.9% applies above certain thresholds, such as $200,000 for single filers, per the IRS.
• Deduction: you can deduct the employer-equivalent portion of self-employment tax when figuring adjusted gross income.

Self-employment tax is in addition to income tax. That is why new owners are so often surprised in their first April.

A worked example (hypothetical)

A made-up sole proprietor runs a one-truck gutter and window cleaning business with $80,000 of net profit on Schedule C for 2026 and no other income.

The $11,303.64 is owed before a single dollar of income tax. Income tax then depends on filing status, deductions, credits, the qualified business income deduction and the rest of the household's return, which is why we stop the arithmetic here. The point of the example: on $80,000 of profit, self-employment tax alone is more than $11,000, and it is due during the year.

What is the simplest way to avoid the penalty?

The IRS says you generally avoid an underpayment penalty if you owe less than $1,000 after withholding and credits, or if you paid at least 90% of this year's tax or 100% of last year's tax, whichever is smaller. For higher-income taxpayers, Form 1040-ES says that if your 2025 adjusted gross income was more than $150,000 ($75,000 if married filing separately for 2026), substitute 110% for 100%.

The prior-year rule is the one most small business owners use, because last year's tax is a known number. Two hypothetical cases, assuming the 2025 return covered all 12 months and there is no withholding:

• 2025 total tax $18,000, AGI under $150,000: pay 100%, which is $18,000, in four payments of $4,500.
• 2025 total tax $18,000, AGI over $150,000: pay 110%, which is $19,800, in four payments of $4,950.

Meeting the safe harbor protects you from the penalty. It does not mean you are paid up. If 2026 is a much bigger year, you will owe the difference when you file, so set money aside for it anyway.

What if your income is seasonal?

A lawn, snow, pool or holiday lighting business can earn most of its profit in a few months. Equal payments can force you to pay tax in April on money you have not made yet. Form 1040-ES says that if you receive income unevenly through the year, for example because you operate on a seasonal basis, you may be able to lower or eliminate the payment for one or more periods by using the annualized income installment method, explained in chapter 2 of Publication 505. It means more paperwork at filing time; ask your accountant whether the cash benefit is worth it. Our guide on seasonal cash flow shows how to put tax payments on a twelve-month cash map.

How do you pay?

Form 1040-ES lists several ways to pay electronically, including your IRS Online Account, IRS Direct Pay from a checking or savings account at no cost, the Electronic Federal Tax Payment System (EFTPS, free but requires enrollment), and debit or credit card or digital wallet through service providers that charge a fee. You can also mail a check with the 1040-ES payment voucher; a payment postmarked by the due date counts as on time.

Keep the confirmation for every payment with your tax records. Your accountant will need the dates and amounts.

How do you make it painless?

1. Open a separate tax savings account at the same bank as your business account. Our guide to opening a business account covers setting up linked accounts.
2. Move a fixed percentage of every deposit into it, weekly. Your accountant can suggest a percentage from last year's return.
3. Put the four due dates in your calendar with a reminder a week early.
4. Price for it. Self-employment tax is a real cost of your labor. Our hourly rate calculator helps you set a rate that covers taxes, overhead and profit instead of just wages.
5. Check your state. If your state has an income tax, it may have its own estimated payment rules and dates. Find your state's agency through our state pages.
6. Review mid-year. After the June payment, compare year-to-date profit to last year. If the business is well ahead, raise the remaining payments or the amount you set aside. Clean books make this a ten-minute job; see bookkeeping for service businesses.

Accurate tax planning needs accurate profit numbers, and accurate profit needs every job invoiced and every payment recorded. If quotes, jobs and invoices live in separate places today, a custom CRM can bring them together. To see where your work comes from first, request a free system quote.

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