How do you plan for self-employment tax payments as a freelancer?

Business & Financial Management for Contractors
1

Been freelancing for a few years now and still feel like I’m winging it when it comes to setting aside money for taxes. Sometimes I’m good about putting away 25-30%, other times I spend it and panic later.

I’m curious how others handle the quarterly payments without constantly second-guessing if they’re saving enough.

2

I just use the safe harbor rule. Pay what I owed last year divided by four.

3

Used to stress about this too until I learned to track my actual tax rate instead of guessing.

First year I saved 25% and came up short. Second year I saved 30% and still owed more. So I looked at my tax return and figured out my real effective rate was around 28%.

Now I save 32% to be safe. But here’s what really changed things - I started tracking it monthly instead of just setting money aside and hoping.

Every month I estimate what I’ll owe based on income so far. Takes maybe 10 minutes with a calculator. If I’m behind, I know right away and can adjust. If I’m ahead, I can relax a bit.

The monthly check ins stopped the panic because I always know where I stand. Way better than flying blind until quarterly payments are due.

4

I save when I can and hope for the best.

5

Open a separate business checking account just for taxes. Every payment that comes in, transfer 30% immediately before you even think about it. Treat it like money that was never yours. I’ve been doing this for 15 years and never scrambled for quarterly payments. The key is making it automatic so you don’t have to rely on willpower when you see money sitting there.

6

I set up automatic transfers but had to adjust the percentage over time. Started with 25% and realized that wasn’t enough after getting hit with a bigger bill than expected.

Now I do:

  • 35% for federal and state taxes
  • Transfer happens every Friday, not when payments come in
  • Use a high yield savings account so the money grows a bit

The Friday thing works better for me because some weeks I get multiple payments and it’s easier to do one big transfer than several small ones. Plus if I end up overpaying, I get a refund that becomes a nice bonus.

Better to save too much than scramble at tax time.

7

I pay quarterly but skip the separate account thing. Just keep track in a simple spreadsheet.

Whenever money comes in, I write down the amount and calculate 25% right away. Then I move that exact amount to savings the same day. No guessing or complicated systems.

The trick is doing it immediately when you get paid, not waiting until later.