Quarterly Tax Savings for 1099 Contractors: How Much to Set Aside
Learn exactly how much to save for quarterly taxes as a 1099 contractor. Includes a simple formula and tips to avoid underpayment penalties.
Cash Flow Forecaster Team
Personal Finance Experts
As a 1099 contractor, nobody withholds taxes from your payments. That means the IRS expects you to pay taxes quarterly—and if you don't, you'll owe penalties on top of what you already owe.
The question everyone asks: how much should I actually set aside?
The Simple Rule: Save 25-30%
For most freelancers, saving 25-30% of every payment will cover your tax obligations. This accounts for:
Understanding Self-Employment Tax
As a W-2 employee, your employer pays half of Social Security and Medicare taxes. As a 1099 contractor, you pay both halves—a total of 15.3% on your net self-employment income.
This Is Why Freelancers Feel Overtaxed
If you earned $80,000 as an employee vs. $80,000 as a 1099 contractor, you'd pay roughly $6,000 more in self-employment tax as a contractor. This catches many new freelancers off guard.
How to Calculate Your Quarterly Payment
Here's a simple formula that works for most freelancers:
Quick Calculation
- 1.Take your total income for the quarter
- 2.Subtract business expenses
- 3.Multiply by 0.25 to 0.30 (your tax rate)
Example:
$15,000 income - $2,000 expenses = $13,000 profit
$13,000 × 0.27 = $3,510 quarterly payment
Quarterly Tax Due Dates (2026)
Period
Income From
Due Date
Q1
Jan 1 - Mar 31
April 15, 2026
Q2
Apr 1 - May 31
June 15, 2026
Q3
Jun 1 - Aug 31
Sept 15, 2026
Q4
Sep 1 - Dec 31
Jan 15, 2027
The Easiest System: Auto-Transfer on Every Payment
Trying to calculate and save quarterly is stressful when income is irregular. Instead, use this system:
Open a separate "Tax" savings account
A basic savings account works. Name it "Taxes" so you don't accidentally spend it.
Transfer 27% of every payment immediately
The same day a client pays you, move 27% to your tax account. Don't wait.
Pay from that account quarterly
When quarterly taxes are due, the money is already set aside. No scrambling.
What If You Don't Pay Quarterly?
If you owe more than $1,000 at tax time and didn't make quarterly payments, the IRS charges an underpayment penalty. The penalty is roughly 8% annual interest on what you should have paid.
For example, if you should have paid $4,000 in Q1 but didn't, you might owe ~$240 extra in penalties by year-end.
Safe Harbor Rule
You can avoid penalties if you pay at least 100% of last year's tax liability through quarterly estimates (110% if your income was over $150,000). Even if you end up owing more, no penalty applies.
How to Pay Quarterly Taxes
You have several options:
- IRS Direct Pay (irs.gov/payments) - Free, instant bank transfer
- EFTPS (eftps.gov) - Free scheduled payments (requires registration)
- Credit/Debit Card - Works but has ~2% fee
- Mail a check - With Form 1040-ES voucher
Most freelancers use IRS Direct Pay because it's instant and free. You'll select "Estimated Tax" and the quarter you're paying for.
Key Takeaways
- Save 25-30% of every payment for taxes
- 15.3% is self-employment tax alone—this surprises many new freelancers
- Pay quarterly to avoid underpayment penalties
- Use a separate tax account to make this automatic
- Safe harbor rule: Pay 100% of last year's tax to avoid penalties
Know When Tax Payments Are Due
Cash Flow Forecaster can show your quarterly tax due dates on your calendar—so you never miss a payment and always know what's coming.
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