Calculator / First year self-employed

First year self-employed: do you pay quarterly taxes?

Starting a business or freelancing for the first time? Here is how estimated tax works when you have no earlier year to compare with.

The basic rule still applies

The IRS says individuals, including sole proprietors, generally must pay estimated tax if they expect to owe $1,000 or more when their return is filed. It also says self-employed individuals generally pay self-employment tax as well as income tax. Your first year is no exception, so a good profit in year one can mean payments before you have filed any return.

Safe harbor in year one

You generally avoid the underpayment penalty if you pay at least 90% of this year's tax, or 100% of the tax shown on last year's return, whichever is smaller. The second option helps only if last year's return shows a tax amount to compare with, so in a first year with no earlier tax the 90% test is the one to plan around. That means estimating profit for a year that has barely started. Re-run the estimate as real numbers arrive. Publication 505 has the detailed rules, including special cases.

If you start in the middle of the year

The due dates do not move. If you earn nothing before July, the annualized income installment method (Form 2210, Schedule AI) lets the early payments follow the income you really had. Here is how it works.

An example

Single filer who starts freelancing in June and earns $8,000 of net profit from June to August and $16,000 from September to December. Total profit is $24,000. The calculator's estimate is about $3,391 of self-employment tax and $620 of income tax, about $4,012 in all. The required annual payment is about $3,610. Equal installments would be about $903 each, including April and June, when nothing had been earned yet. The annualized method gives $0 on April 15 and June 15, about $1,144 on September 15 and about $2,466 on January 15.

Enter your profit by period under "In lumps or seasons" in the calculator. If you also have a job, see side hustle plus a W-2 job.

First-year checklist

Open a separate account for business income and expenses.
Set aside a share of every payment for taxes.
Keep records of income, expenses and miles from day one.
Mark the four due dates in your calendar.

This is general information, not tax advice. See the disclaimer.

Sources

Last checked October 11, 2026.