Using 2025 Income to Determine 2026 Quarterly Payments?

[middle89]

Is it true that when paying 2026 quarterly estimated 1099 contractor tax payments that you can avoid underpayment penalties by paying 100% of your 2025 income? (Divided into 4 for each quarter?) If so, is this true even if your 2025 income was very low, and didn't include any 1099 contractor income? (And only included Texas Unemployment and savings interest income?)

Additionally, is it true that it's technically not your 2025 income but your 2025 total tax liability that you pay 100% of in 2026 across the quarterly payments to avoid penalties? Which could possibly be $0 if your 2025 income was below the standard deduction threshold of ~$15,700? And in that case would you be essentially exempt from making 2026 estimated quarterly payments since there would be no penalties?

Also as a side note, I'm not sure if I need to be setting aside 25% or 30% for 1099 taxes. How can I have this estimated for me personally?

[MinhT1]

The IRS says in this document:

You may avoid the Underpayment of Estimated Tax by Individuals Penalty if:

• Your filed tax return shows you owe less than $1,000 or
• You paid at least 90% of the tax shown on the return for the taxable year or 100% of the tax shown on the return for the prior year, whichever amount is less. If your adjusted gross income (AGI) for 2023 was more than $150,000 ($75,000 if your filing status for 2024 is married filing separately), substitute 110% for 100%.

This applies even if in your prior year (2025), your tax liability (and not your taxable income) was very low. If you had no liability in 2025, then you do not incur penalty even if you do not pay estimated taxes in 2026.

In 2026, if you have self-employed income, you'll have to pay self-employment tax in addition to regular income taxes. Self-employment tax is calculated as 15.3% of 92.35% of your net self-employed income (after deduction of expenses). Income tax is paid on your taxable income (after deduction of the standard deduction and other deductions) and depends on your tax bracket.

See this TurboTax article for tax brackets.

[NCperson]

x

[middle89]

So if my 2025 tax liability was very low but not quite 0, could I just pay my entire 2025 tax liability in the first quarterly estimated payment for 2026 and then not worry about any more payments for the rest of the year?

And the self employment tax isn't a separate tax I need to pay quarterly is it? Or does my above question cover all potential quarterly taxes? 

And can you tell if my income is likely to be around $75,000 this year if I'd be closer to 25% or 30%? Or if not is there a good calculator I can use for that?

[NCperson]

Q. So if my 2025 tax liability was very low but not quite 0, could I just pay my entire 2025 tax liability in the first quarterly estimated payment for 2026 and then not worry about any more payments for the rest of the year?

A. correct

Q. And the self employment tax isn't a separate tax I need to pay quarterly is it? Or does my above question cover all potential quarterly taxes? 

A. it's part of the first question.

A. And can you tell if my income is likely to be around $75,000 this year if I'd be closer to 25% or 30%? Or if not is there a good calculator I can use for that?

Q. I like this calculator, which is still set for 2025, but that just means it'll create an answer that is about 3% higher than if it were set to 2026. 

https://www.dinkytown.net/java/1040-tax-calculator.html

[MonikaK1]

Yes, you can pay 100% of your 2025 tax liability (based on the previous year's safe harbor (110% of the 2025 liability if your AGI exceeded $150,000) with the first quarterly estimated payment for 2026, due April 15, 2026 (the first quarterly deadline), and avoid an underpayment penalty for tax year 2026.

The self-employment tax is part of your total liability on Form 1040. If you owe other taxes outside of Form 1040, such as employment taxes, those have their own separate deadlines.

If your taxable income for 2026 were $75,000, you would be in the 22% federal marginal tax bracket  (22% for incomes over $50,400) if filing as a single person. See this IRS webpage for all of the marginal tax brackets for 2026.

You can use Tax Caster to help with quick estimates, though it is currently still set for 2025 tax rates.

[middle89]

"The self-employment tax is part of your total liability on Form 1040. If you owe other taxes outside of Form 1040, such as employment taxes, those have their own separate deadlines."

Are you saying that I can also just take care of 100% of the self-employment tax for the year at the first quarterly deadline? And that I most likely can take care of 100% of all taxes I will have at the first quarterly deadline?

"If your taxable income for 2026 were $75,000, you would be in the 22% federal marginal tax bracket  (22% for incomes over $50,400) if filing as a single person. See this IRS webpage for all of the marginal tax brackets for 2026."

Are you saying that I would withhold 22% in total of my 1099 income and that would cover all my taxes (self-employment tax, income tax, etc.)?

[NCperson]

<<Are you saying that I can also just take care of 100% of the self-employment tax for the year at the first quarterly deadline? >>

Yes, the IRS will always accept money early! 

<<And that I most likely can take care of 100% of all taxes I will have at the first quarterly deadline?>>

yes, the IRS will always accept money early! 

<<Are you saying that I would withhold 22% in total of my 1099 income and that would cover all my taxes (self-employment tax, income tax, etc.)?>>

No, because that statement only addressed the INCOME tax.  The SELF-EMPLOYMENT tax is separate and additional.

0

[middle89]

"No, because that statement only addressed the INCOME tax.  The SELF-EMPLOYMENT tax is separate and additional."

Ok I see. What is the best way for me to determine my personalized overall % of income from my 1099 work to withhold for this year?

[NCperson]

@middle89  I like using this tool; it is quite accurate:

https://www.dinkytown.net/java/1040-tax-calculator.html