The US tax system is pay-as-you-go. For an employee, withholding handles that automatically. For everyone else, it does not.
Who this applies to
- Self-employed people and contractors receiving 1099s.
- Small business owners taking income from the business.
- People with significant income that is not subject to withholding.
- Anyone who owed a meaningful amount at filing last year with nothing withheld.
How to estimate
- 01Start from last year's return if your situation is similar. It is the easiest reference point.
- 02Estimate this year's income and subtract expected business expenses.
- 03Remember self-employment tax, which is a real addition on top of income tax.
- 04Divide across the payment periods.
- 05Adjust during the year if income changes substantially.
What happens if you skip them
A penalty can apply for underpayment even if you pay the full amount when you file. That surprises people who assumed paying in April was sufficient.
A practical habit: move a percentage of every payment you receive into a separate savings account the day it arrives. The exact percentage depends on your situation, and the discipline matters more than the precision.
Get the number right
We calculate estimated payments for self-employed clients across the Permian Basin. Call (432) 257-7547 or come by 700 C Andrews Hwy in Midland. We work in English and Spanish.
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