When you're paid on a 1099 as a contractor, freelancer or owner of a single-member LLC, no employer withholds tax from your pay. The IRS still expects the tax during the year, not all at once in April. That's what quarterly estimated taxes are for.
Texas has no state income tax, so Texas residents only make federal estimated payments.
Who needs to pay quarterly estimated taxes
You generally need to make estimated payments if you expect to owe $1,000 or more in federal tax when you file your return, after subtracting any withholding and credits. That usually includes:
- Independent contractors and freelancers paid on Form 1099-NEC
- Owners of single-member LLCs and partners in multi-member LLCs
- S corp owners whose salary withholding doesn't cover the tax on their distributions
- Anyone with significant income that has no withholding, such as rental income
If you also have a W-2 job, you can sometimes cover the tax on your side income by increasing withholding at that job instead.
Quarterly estimated tax due dates
| Payment | Income earned | Due date |
|---|---|---|
| 1st | January 1 to March 31 | April 15 |
| 2nd | April 1 to May 31 | June 15 |
| 3rd | June 1 to August 31 | September 15 |
| 4th | September 1 to December 31 | January 15 of the next year |
When a due date falls on a weekend or holiday, the payment is due the next business day. Note that the "quarters" aren't equal; the second covers only two months.
How much to pay
Your estimated payments need to cover two taxes on your 1099 income:
- Income tax, at your regular federal rate
- Self-employment tax of 15.3%, which covers Social Security and Medicare for the self-employed
A practical way to estimate:
- Estimate your net profit for the year: 1099 income minus business expenses.
- Estimate the self-employment tax and income tax on that profit, using last year's return as a guide or the worksheet that comes with Form 1040-ES.
- Divide the total by four and pay that amount on each due date.
- Adjust later payments if your income turns out higher or lower than expected.
Accurate books make step 1 much easier. If your business expenses aren't recorded during the year, you'll either overpay or underpay.
Safe harbor rules that avoid penalties
You won't owe an underpayment penalty if your payments, made on time, add up to at least:
- 90% of the tax you owe for the current year, or
- 100% of the tax on last year's return (110% if last year's adjusted gross income was over $150,000)
The prior-year rule is the easier one to plan around, because you already know the number. If your income is growing, paying based on last year keeps you safe from penalties, though you'll still owe the difference when you file.
How to make the payments
You can pay the IRS online through IRS Direct Pay or your IRS online account, or mail a check with a Form 1040-ES voucher. The IRS stopped accepting new individual enrollments in EFTPS in October 2025 and is moving individuals off it during 2026, so use Direct Pay or your online account for estimated payments. Paying online gives you an immediate confirmation, and your IRS online account shows every payment you've made for the year. Keep those confirmations with your tax records.
Common mistakes with estimated taxes
- Waiting until April to pay the whole year's tax, then facing penalties on top
- Forgetting self-employment tax and planning only for income tax
- Missing the June 15 payment because it comes only two months after April
- Spending the tax money because it sat in the business checking account
- Not keeping track of business expenses, so profit is overstated
A separate savings account for taxes helps with most of these. Each time you're paid, move a share of it there, so the money is waiting on each due date. If you take money out of an LLC, my post on how to pay yourself from an LLC explains how draws and taxes fit together. And if you pay contractors yourself, see how to file 1099s in QuickBooks Online.
Want help planning your estimated taxes?
I've worked in accounting for 38 years, and I help small business owners and contractors plan what they'll owe during the year, so April holds no surprises. I work online from Weatherford, Texas. See my tax preparation and planning services or book a short intro call.
Sources
- IRS: About Form 1040-ES, Estimated Tax for Individuals
- IRS Direct Pay
- EFTPS: notice on individual enrollments
This article is general information, not tax advice for your specific situation. Tax rules and thresholds can change.