What you withhold/send to the state depends on what state one is in, as not all tax personal income at the same rate as federal. The 20% I recommend includes SE tax on the federal side. Now at tax time your overall tax rate will actually be higher than 20% with SE tax included. But I recommend 20% on the *gross* business income. Then at tax time when you file, your potentially higher tax rate will be on your net profit *taxable* business income, which is determined after all your business deductions.
So for example, if your gross income is $20K per quarter ($80K for the year) you'd send the IRS $4K per quarter, which comes to $16K for the year. THen when you complete the SCH C at tax time and figure in the business expense deduction, depreciation and the such, your taxable business income may only be $50K at a 22% tax rate for standard normal taxes, and the additional 15.2% for the self-employment tax. Then 37.2% of $50K would be $18,600. That means at tax filing time you owe the IRS an additional $2,600 for taxes. Now the one thing I didn't figure in here because I don't fully understand it, is where there's some kind of a tax break of some sorts, on the first 20% of taxable business income. But so long as what you owe at tax time is under 10% or $1000 (whichever is higher) of your entire household tax liability, no underpayment penalties are assessed.
I've been doing this in my business for 12-13 years now, and I've always been within $500 of my tax liability every year. Some years I owe, and it's always less than $500 for me. Some years I get a refund, and that too is always less than $500. IN all these years the most I've ever had to pay at tax filing time if I owed, was $472.
