Quarterly Estimated Taxes for Tradespeople: A Plain-English Guide

On a W-2, taxes come out of every paycheck. On your own, nobody does that for you. The IRS still wants its money during the year, not just in April.

That's what quarterly estimated taxes are. Here's how they work and how to stay out of penalty trouble.

Key takeaways

• If you expect to owe $1,000 or more in federal tax when you file, you generally need to pay estimated taxes.
• The 2026 tax year's last payment is due January 15, 2027. The 2027 payments are due April 15, June 15, and September 15, 2027, and January 2028.
• Avoid underpayment penalties by paying at least 90% of this year's tax, or 100% of last year's (110% if last year's AGI was over $150,000).
• Colorado has its own estimated payments on the same schedule, using form DR 0104EP.
• Move a set percentage of every payment into a tax savings account, so the money's there when it's due.

Who has to pay

The IRS says individuals, including sole proprietors, partners, and S-corp shareholders, generally have to make estimated payments if they expect to owe $1,000 or more when they file their return.

That covers most tradespeople with 1099 or self-employment income. Your tax bill includes:

• Federal income tax
• Self-employment tax of 15.3% on net earnings (Social Security portion capped at $184,500 for 2026)
• State income tax

There's an exception: if you owed no tax last year, were a U.S. citizen or resident all year, and last year was a full 12-month tax year, you may not have to pay estimates this year. That's rare after your first year in business.

When it's due

The IRS splits the year into four payment periods:

Notice the periods aren't equal. The June payment comes just two months after April.

If a due date lands on a weekend or legal holiday, the payment is on time if you make it the next business day.

Coming up:

• January 15, 2027: fourth payment for 2026
• April 15, 2027: first payment for 2027
• June 15, 2027: second payment for 2027
• September 15, 2027: third payment for 2027
• January 2028: fourth payment for 2027 (check the IRS for the exact date)

You can also pay more often, weekly or monthly, as long as enough is paid by each due date.

How much to pay: the safe harbor rules

You avoid the federal underpayment penalty if you pay the smaller of:

• 90% of the tax you'll owe for this year, or
• 100% of the tax shown on last year's return

If last year's adjusted gross income was more than $150,000 ($75,000 if married filing separately), that second number becomes 110% of last year's tax.

You're also generally safe if you owe less than $1,000 after withholding and credits.

The simplest method

Take last year's total tax (or 110%, if it applies), divide by four, and pay that each quarter. As long as last year was a full year, you're protected from the penalty even if you earn more this year. You'll still owe the difference in April, so keep saving.

If your work is seasonal

Landscapers, roofers, and other seasonal trades often earn most of their money in a few months. The IRS annualized income installment method lets you match payments to when you actually earn the money. It uses a schedule attached to Form 2210. It's more paperwork, so ask your CPA.

If you're an S-corp owner

You'll pay yourself a salary through payroll, with taxes withheld. Withholding can cover much of your tax. You may still need estimates for distributions. Your CPA can tune your withholding so you don't have to. See LLC vs S-Corp vs Sole Proprietor.

How to pay

Federal options from the IRS include:

• IRS Online Account or IRS Direct Pay (free, from your bank account)
• EFTPS, the Treasury's electronic payment system
• Debit or credit card (processing fees apply)
• Mailing a check with a Form 1040-ES voucher

Save your confirmation numbers. You'll need the totals when you file.

Don't forget Colorado

Colorado collects estimated income tax too. Payments are due in four equal installments on April 15, June 15, September 15, and January 15. Use the worksheet on Colorado form DR 0104EP to figure the amount, and pay through Colorado's Revenue Online or by voucher. Check the DR 0104EP instructions to see if you're required to pay.

If you live in another state, check your state's revenue department. Most states with an income tax have their own estimated payment rules.

A simple system so the money's there

The hard part isn't the form. It's having the cash when the date comes.

1. Open a separate tax savings account at the same bank as your business checking. See business banking for tradespeople.
2. Every time you get paid, move a set percentage to tax savings. Many self-employed people start around 25–30% and adjust once their CPA sees real numbers.
3. Put all eight dates on your calendar (four federal, four state) with a reminder a week before.
4. Pay from the tax savings account, not from operating cash.
5. Check in mid-year. If business is way up or down, adjust your payments.

Lower the bill legally: track your deductions

Every legitimate business expense lowers the profit you're taxed on. Common ones for tradespeople:

• Tools and equipment
• Vehicle costs, either actual expenses or the IRS standard mileage rate (for 2026, the IRS set 72.5 cents per mile for January–June and 76 cents for July–December)
• Business insurance
• Phone and software
• Licenses, training, and continuing education
• Half of your self-employment tax (as an adjustment to income)
• The qualified business income (QBI) deduction, which is now permanent under 2025 federal tax law, for many owners

Keep receipts and a mileage log. Your CPA decides what qualifies.

What if you missed a payment?

Pay as soon as you can. The underpayment penalty works like interest, so it grows the longer you wait. Don't skip the next payment because you missed one. If you had a casualty, disaster, or other unusual situation, ask your CPA about penalty relief.

FAQ

Do I have to pay estimated taxes my first year in business?
Often yes, if you'll owe $1,000 or more. If you owed no tax the year before, you may be exempt. If you still have a W-2 job, you can increase withholding there instead.

What happens if I don't pay quarterly?
You may owe an underpayment penalty, plus the full tax in April. That April bill can be a shock.

Can I just pay everything in April?
You can, but you'll likely owe a penalty, and it's easy to spend money that should have gone to taxes.

Does my LLC pay estimated taxes?
A single-member LLC with default tax treatment doesn't pay its own income tax. You pay on your personal return, so you make the estimated payments.

Get your money system set up

Fresh Start Consulting connects tradespeople with business checking and savings set up the right way for taxes, through trusted banking partners. See our Business Banking services or book a free 30-minute call.

This article is for educational purposes only and is not tax advice. Tax laws, rates, and due dates change. Talk to a licensed CPA or enrolled agent about your specific situation.

Evan Lightner is the founder of Fresh Start Consulting. He started as a 12-volt and telematics technician and built his first company from the ground up. More about Evan.