Setting Money Aside for Quarterly Tax
Why a separate account, not a mental note
The money you owe in tax is not income — it is money you are holding on someone else's behalf. Left in your current account it looks like available balance, and it gets spent. The single most effective habit in freelance finance is moving the tax share out the day a client pays, into an account you do not have a card for.
Keep it separate from your emergency fund too. If the two are one pot, an emergency costs you the emergency and a tax bill you can no longer pay, plus an underpayment penalty on top.
How much to hold back
Somewhere between a quarter and a third of what you are paid covers most freelancers, but the honest answer depends on your profit rather than your revenue. Self-employment tax is 15.3% of 92.35% of net profit — about 14.1% — and federal and any state income tax come on top of that. Deductible expenses reduce all of it, so a business with real costs needs a smaller share than one without.
Over-reserving is the cheaper mistake. A surplus in January is yours; a shortfall is a penalty.
Frequently Asked Questions
When are the payments actually due?
Federal estimated tax is due four times a year, on the 15th of April, June and September and the 15th of the following January, each moving to the next business day when it falls on a weekend or holiday. The periods are not equal quarters — the June payment covers only April and May, while the September one covers three months.
What if I live in California?
California does not use four equal payments. The Franchise Tax Board wants 30% by 15 April, 40% by 15 June, nothing in September and the remaining 30% by 15 January — so two thirds of the year's state tax is due before July. Setting aside evenly and paying in federal proportions leaves you short twice.
Do I have to make estimated payments at all?
Federally, if you expect to owe $1,000 or more for the year. Below that, no payments are required. States set their own floors — California's is $500 of state tax.
Is my data stored anywhere?
No. Deposits are kept in your own browser and never sent to a server, which also means they do not follow you to another device and are lost if you clear your browser data.