Four dates, one formula from last year’s return, and a withholding trick that can rescue a blown year in December.
Nobody withholds taxes from a freelancer’s invoice. The IRS still wants its money during the year, not in April — so self-employed people pay in four installments, and the system penalizes guessing low. The good news: there is a formula that makes the penalty mathematically impossible, and it takes ten minutes a year to use.
Anyone who expects to owe at least $1,000 in federal tax beyond what withholding covers. In practice that is nearly every profitable freelancer, consultant, gig worker, and small business owner. Remember you are paying two taxes: income tax on profit, plus 15.3% self-employment tax — which is why people who “saved 15% for taxes” still come up short.
For 2026 income: April 15, June 15, and September 15, 2026, and January 15, 2027. Note the spacing — the second “quarter” is only two months. Miss a date and the penalty meter starts running on that installment, even if you catch up later, and even if your April return shows a refund.
Pay 100% of last year’s total tax — line 24 of your 1040 — divided into four equal payments, and no underpayment penalty can apply, no matter how much you actually earn this year. If last year’s adjusted gross income was over $150,000, the target is 110% of last year’s tax. That is the whole strategy: pull one number off last year’s return, divide by four, set four calendar reminders.
Last year’s 1040 showed $22,000 of total tax and AGI under $150k. Pay $5,500 on each of the four dates and you are penalty-proof for the year — even if this year’s income doubles. You will owe the difference in April, but with zero penalty.
The alternative is paying 90% of the current year’s tax as you go — useful when this year is clearly worse than last year, since the safe harbor would overpay. If income swings seasonally, Form 2210’s annualized method matches payments to when money actually arrived, at the cost of real paperwork.
Interest, essentially: the federal short-term rate plus three points — it has hovered around 7–8% in recent years — applied to each underpaid installment for as long as it stays underpaid. On a $5,000 shortfall for one quarter, roughly $100. Not ruinous, but it stacks quarterly and it buys you nothing.
IRS Direct Pay (free, from a bank account, takes two minutes, select “Estimated Tax — 1040-ES”) or EFTPS if you want scheduled payments and a full history. Save the confirmation number with your tax records. Most states with income tax run a parallel estimated system with the same dates — the federal payment does not cover your state.
The withholding rescue. Tax withheld from any W-2 paycheck — yours or a spouse’s — is treated as paid evenly through the year, even if it all comes out in December. Behind on estimates in November? Cranking up a spouse’s withholding for the last paychecks can retroactively fix the whole year. Estimated payments can’t do that.
Open a tax sub-account. Move 25–30% of every owner draw into a separate savings account the day it lands. The quarterly payment then becomes a transfer, not a crisis.
The contractor tax calendar in the downloads library lists all four dates plus every other deadline through April 2027 — it works for any self-employed person, not just contractors.
Foad is a federally licensed Enrolled Agent who writes about tax and bookkeeping for small businesses.