Taxes
Quarterly estimates without the panic
If some of your income arrives without withholding, four dates a year matter. What to set aside, when it is due, and how to stop borrowing from money you already owe.
Why this catches people
An employer withholds tax from every paycheck before you see it. The money never feels like yours because it never is. Work for yourself and that machinery disappears: the full payment lands in your account and every dollar of it looks spendable.
It is not. Somewhere between a quarter and a third of it belongs to a tax authority, and the bill arrives whether or not you kept it.
The four dates
US estimated payments are due on 15 April, 15 June, 15 September and 15 January. The quarters are uneven: the June payment covers only April and May, while the January payment covers September through December.
Where a date falls on a weekend or a federal holiday it moves to the next business day.
Working out the number
Take the profit, not the revenue. If a business billed $148,300 and had $31,480 of deductible expenses, the profit is $116,820.
Self-employment tax runs at 15.3% on roughly 92.35% of that profit, which is about $16,506. Income tax applies on top, at whatever your bracket works out to once the deductible half of the self-employment tax comes off.
If wages from a job are also in the picture, they are computed separately: self-employment tax applies only to the profit, never to the W-2 income. Treating the two as one number is what produces an estimate wrong in both directions.
A reserve of 30% of profit is a serviceable rule of thumb until you have a year of real figures. It is deliberately conservative.
Hold it somewhere else
The single most effective habit is moving the reserve out of the operating account the day a payment clears. Money that stays in the account you spend from will be spent from.
A separate savings account is enough. It does not need to earn anything interesting; it needs to be somewhere that requires a deliberate act to reach.
The safe harbour
If a year is unpredictable, paying 100% of last year's total tax across the four instalments generally protects you from an underpayment penalty, even if this year turns out much bigger. At higher incomes that threshold rises to 110%.
That is a floor for avoiding a penalty, not a substitute for the real number. You still owe the difference at filing.
