Quarterly Taxes for Contractors

Estimated federal taxes are generally due in mid-April, mid-June, mid-September, and mid-January of the following year, covering income earned in the preceding period. The exact calendar dates shift slightly year to year when they land on a weekend or holiday, so check the current IRS schedule each January rather than assuming last year's dates repeat exactly.

A simple approach: take your year-to-date net profit, calculate roughly what you'll owe for the full year in income tax plus self-employment tax, divide by four, and true it up each quarter as your income becomes clearer. Many contractors instead set aside a fixed percentage — commonly 25-30% of every payment received — into a dedicated tax savings account so the quarterly number is already sitting there when it's due.

The IRS charges an underpayment penalty calculated roughly like interest on the shortfall for each quarter you didn't pay enough, even if you pay the full balance by the annual filing deadline. It's usually not catastrophic for one missed quarter, but it compounds if you consistently underpay, and it's an easy cost to avoid entirely with basic planning.