US money guide
Quarterly taxes: the freelancer's survival guide
The hardest part of self-employment isn't finding clients. It's that every dollar hits your account untaxed, feels like yours, and then in April turns out not to have been.
Self-employment tax: the 15.3% surprise
As an employee, you pay 7.65% in FICA and your employer pays the other half. Self-employed, there's no employer — you pay both halves, 15.3%, on 92.35% of your net earnings. That's before a cent of income tax.
The Social Security portion (12.4%) stops at the wage base; the Medicare portion (2.9%) has no cap, with an extra 0.9% above $200,000 single. You do get to deduct half of the total against your income tax, which softens it.
The four dates
- April 15 — for income earned January to March
- June 15 — for April and May
- September 15 — for June to August
- January 15 — for September to December
Note they're not even quarters — Q2 covers two months, Q4 covers four. Nobody knows why.
Safe harbor: the rule that saves you
You can avoid underpayment penalties by paying either 90% of this year's tax or 100% of last year's (110% if you earned over $150,000). The second option is powerful because you already know last year's number — so even if you have a breakout year, paying last year's amount in four instalments keeps you protected.
The deductions people forget
- Half your self-employment tax — automatic, but only if you claim it.
- Home office — a genuine dedicated space, either simplified at $5/sq ft or actual costs.
- Health insurance premiums — self-employed people can often deduct these above the line.
- Solo 401(k) or SEP IRA — far higher limits than a normal 401(k), and it directly reduces taxable income.
- QBI deduction — up to 20% of qualified business income, with phase-outs for service businesses.
If you're behind
Pay what you can as soon as you can — penalties accrue as interest, so a late payment is better than a later one. And if this is your first year, know that the second year is the one that stings: you may owe the previous year's balance and your first estimated payments at the same time.
Quick answers
How much should I set aside for taxes as a 1099 contractor?
A common rule of thumb is 25–30% of net profit at lower incomes and 30–40% once you are in higher brackets or a high-tax state. Self-employment tax alone is 15.3%.
When are quarterly estimated taxes due?
Roughly April 15, June 15, September 15 and January 15 for the previous quarter. Dates shift slightly when they fall on a weekend or holiday.
What happens if I do not pay quarterly?
The IRS charges an underpayment penalty, calculated as interest on what you should have paid. Paying it all in April does not avoid it.
What is the safe harbor rule?
If you pay at least 100% of last year’s tax liability (110% if your income was over $150,000), you generally avoid underpayment penalties even if you owe more at filing.
Written in plain English by mytakehome.money. General information, not financial advice — check anything important at gov.uk or with a qualified adviser.