Self-employed individuals, contractors, consultants, freelancers, gig workers, real estate professionals, and business owners often earn income with no automatic withholding. That means taxes may need to be paid throughout the year through estimated tax payments.
Estimated taxes are not just a filing-season issue. They are a cash flow issue, a compliance issue, and a business planning issue all at once.
What Are Estimated Taxes?
Estimated taxes are periodic payments made during the year to cover tax on income that is not subject to withholding or is not fully covered by it. They can apply to:
- Self-employment, freelance, and consulting income
- Gig economy income and business profits
- Partnership and S corporation pass-through income
- Rental income
- Investment income, capital gains, interest, and dividends
- Retirement income without enough withholding
Depending on your situation, estimated taxes can cover income tax, self-employment tax, and other taxes.
Why the Self-Employed Get Surprised
Employees usually have federal and state tax withheld from every paycheck. The self-employed generally receive gross payments and must set aside funds for taxes themselves.
A deposit in your business account is not the same as after-tax profit. Some of that cash may need to be reserved for income tax, self-employment tax, California tax, payroll obligations, sales tax, or business expenses.
Who Generally Needs to Pay?
For federal individual taxes, estimated payments are generally required when both are true:
- You expect to owe at least $1,000 in tax after subtracting withholding and refundable credits.
- Your withholding and refundable credits are expected to be less than the smaller of 90% of the current-year tax or 100% of the prior-year tax. For certain higher-income taxpayers, the prior-year figure is 110%.
Special rules can apply for farmers, fishers, household employers, nonresident aliens, higher-income taxpayers, those with short tax years, and others.
2026 Federal Due Dates
For calendar-year taxpayers, the standard federal estimated installments are generally due:
- April 15, 2026
- June 15, 2026
- September 15, 2026
- January 15, 2027
If a due date falls on a weekend or legal holiday, it generally moves to the next business day. Disaster relief can also shift deadlines for affected taxpayers.
California Due Dates and Percentages
California individual estimated payments are also quarterly, but the state uses a different, front-loaded pattern. For 2026, the percentages are generally:
This catches taxpayers who assume federal and California installments are identical. Note that California’s second payment in June is the largest.
How to Calculate Them
There is no single percentage that works for everyone. Your estimated taxes depend on:
- Net business profit and filing status
- Other household income and any spouse withholding
- Business deductions, retirement contributions, and health insurance deductions
- Self-employment tax and state income tax
- Credits and new deductions
- Prior-year liability and current-year income changes
Many self-employed taxpayers use the Form 1040-ES worksheets, tax projections, or CPA-prepared estimates. If your income is irregular, the annualized income method can help you avoid overpaying early or underpaying later.
How Much to Set Aside
A common rule of thumb is to set aside a percentage of net profit, but the right amount varies. Someone with high income, multiple states, limited deductions, or no spouse withholding may need to reserve more than someone with lower income or significant withholding elsewhere. A better approach is to review year-to-date profit regularly and update your projections as income changes.
How to Pay
You can often pay online, through an IRS online account, by electronic funds withdrawal, by phone, through approved processors, or by mailing vouchers. Keep confirmation numbers and proof of payment.
For California payments, keep records showing the tax year, amount, date, method, and confirmation number. Do not combine payments for different tax years unless the agency’s instructions specifically allow it.
1099-K and Gig Worker Update
The federal 1099-K threshold for payment platforms generally returned to payments over $20,000 and more than 200 transactions. Payment card transactions and some state rules may still produce a 1099-K at lower amounts.
Form or no form, taxable income from goods sold at a gain or services performed must be reported. Because a 1099-K often shows gross payments, reconcile fees, refunds, chargebacks, and non-income amounts against your business records.
New Deductions May Affect Your Estimates
Recent federal law introduced new or expanded deductions for some taxpayers, including ones tied to qualified tips, qualified overtime, qualifying vehicle loan interest, and eligible seniors. These come with eligibility rules, income limits, documentation requirements, and time periods. They may change your projections, but do not assume they apply without a review.
Common Mistakes
- Not setting aside money for taxes
- Waiting until filing season to calculate
- Using gross revenue instead of net profit
- Forgetting self-employment tax
- Ignoring California estimates
- Assuming a 1099-K threshold determines whether income is taxable
- Not tracking payment confirmations
- Missing the June payment because it falls only two months after April
- Forgetting investment income or capital gains
- Not updating estimates when income rises
A Practical Workflow
Monthly
- Update bookkeeping
- Reconcile bank and credit card accounts
- Save receipts and invoices
- Set aside tax reserves
Quarterly
- Review year-to-date profit
- Update your projections
- Pay federal and state estimates by the deadlines
- Review withholding if you or your spouse also earn wages
Year-end
- Review retirement contributions
- Confirm business deductions
- Evaluate equipment purchases and depreciation
- Gather Forms 1099 and platform reports
- Confirm all payments were applied to the correct year
Frequently Asked Questions
Do all self-employed people need to make estimates?
Not always. It depends on your expected tax, withholding, refundable credits, income level, and prior-year tax.
What happens if I underpay?
You may owe an underpayment penalty, interest, or a larger balance at filing time, depending on the facts.
Can I just increase my wage withholding instead?
Some taxpayers with wage income can adjust withholding to cover other income. Review this carefully before relying on it.
Are estimated taxes deductible?
Federal estimated income tax payments are not business expenses. State income tax payments may affect itemized deductions, subject to applicable limits.
Should I use one flat percentage?
A percentage can help with budgeting, but a projection is more accurate.
Schedule a Consultation
Westgate CPA assists self-employed individuals, consultants, freelancers, gig workers, independent contractors, and business owners with tax preparation, estimated tax planning, bookkeeping, accounting, and advisory services. If you are unsure how much to pay or set aside, contact our office to schedule a consultation.
A Note on Estimates
Estimated tax calculations are projections. Your actual tax may differ based on final income, deductions, credits, payments, state rules, and law changes. Due dates may be affected by weekends, holidays, fiscal-year filing, or disaster relief.
Disclosures
Westgate CPA may provide tax preparation, tax planning, accounting, bookkeeping, business advisory, and notice-response support services. The services available to you depend on your needs, the terms of any engagement, and applicable professional standards.
Consultation, review, planning, bookkeeping, accounting, and representation services may require separate engagement agreements, professional fees, and document requests.
This content may reference federal, California, and general business tax concepts. The rules that apply to you can vary based on your filing status, entity type, state residency, ownership, income level, documentation, deadlines, and other facts.
Disclaimer
This material is for general informational and educational purposes only. It is not legal, tax, accounting, financial, payroll, or investment advice, and you should not rely on it as such.
Reading this content does not create a CPA-client relationship, an attorney-client relationship, or any professional engagement with Westgate CPA.
Tax laws, forms, agency procedures, due dates, and guidance change often, and some rules apply differently at the federal, state, local, or international level. No tax outcome, refund, penalty relief, tax savings, audit result, notice resolution, or agency response is guaranteed.
Before making decisions or taking action, consult a qualified tax professional, CPA, attorney, payroll advisor, or other appropriate professional who can review your specific facts and documents.