Hey {{first name | there}},
Businesses do not withhold taxes from contractor payments the way they do for employees. You calculate and pay those yourself.
September 15 is the next quarterly date. It covers June through August. Let's go through the math below.
How to calculate and file contractor taxes
TL;DR:
Self-employment tax is 15.3% on 92.35% of net earnings once you clear $400. You pay both halves.
On $60,000 of net profit (single filer, 2026), federal tax is about $12,989, or $3,247 a quarter.
Set aside 25 to 30% of every payment. High earners or high-tax states often need 35 to 40%.
A missing 1099 does not erase the income. The 1099-NEC threshold is $2,000 for 2026.
Next quarterly date: September 15, 2026.
Start with net profit
Net profit is gross income minus ordinary business expenses. That number, not your invoices, is what the IRS taxes. Calculate self-employment tax and federal income tax separately, then add your state rate.
The 12.4% Social Security slice of SE tax stops at the 2026 wage base of $184,500 on combined wages and self-employment earnings. Medicare has no cap. Combined Medicare wages and self-employment income over $200,000 (single) also pick up an extra 0.9% Additional Medicare Tax.
What actually goes on the return
Calling yourself a freelancer, contractor, or sole proprietor does not change the default return. You file Form 1040 with Schedule C and Schedule SE. Estimated payments go through Form 1040-ES, IRS Direct Pay, or EFTPS.
An extension (Form 4868) only buys time to file. Payment is still due April 15, 2027.
The deductions that usually move the number: half of SE tax, the 20% QBI deduction (permanent starting 2026), a documented home office, mileage, health insurance premiums, software, and ordinary equipment. Keep the backup for at least 3 years.
01. Add up June through August net profit. Divide expected annual federal tax by four, or use the annualized method if income is lumpy. September 15 is Q3. |
02. Move 25 to 30% of every new payment into a separate account. Do it when the invoice clears, not when you remember in December. |
03. Keep invoices, receipts, and pay records in one place. Schedule C is easier when the year is documented as it happens. |
Track the income, park the percentage, and pay the quarter on time. Clean documents make the rest of it simpler.
One note: we are not a CPA firm or a tax advisory service. We make it easy to create pay stubs, W-2s, invoices and 1099s. For anything specific to your situation, talk to your accountant.
See you next week,
The PayStubsNow Team