Set aside 25–35% of every net payment you receive into a dedicated tax savings account. The exact percentage depends on your effective income tax rate plus the 15.3% self-employment tax. Pay the IRS quarterly from that account using Form 1040-ES so the money is never commingled with operating funds.
When no employer withholds taxes from your paycheck, every dollar of net income you keep is partially owed to the IRS and your state. The discipline is simple: reserve a fixed percentage of each payment before you spend it, keep it in a separate account you treat as untouchable, and pay quarterly. This is general education — consult a licensed CPA or enrolled agent for your specific withholding math.
A common rule of thumb is 25–35% of net income after business expenses. The low end applies if your total income is modest and you're in a lower federal bracket; the high end applies when income is higher or your state has a significant income tax. The math behind it: self-employment tax alone is 15.3% on the first portion of net SE earnings (calculated on Schedule SE). On top of that, add your estimated federal income tax rate (look up the current brackets in IRS Revenue Procedure 2024-61 or the current year's equivalent) plus your state rate. Reserve at the combined rate and you'll have enough.
Keep your reserved tax money completely separate from your operating account and personal checking. Open a plain savings account at your bank, label it clearly ("Tax Reserve"), and transfer the reserved percentage every time you receive a payment — before paying yourself or any business expense. This removes the temptation to spend it and eliminates the scramble to find the money at each quarterly deadline. A high-yield savings account earns modest interest on the balance while you hold it.
Freelance and business income is rarely flat. When you have a big month, transfer the reserve immediately. When income is slow, the reserve account protects you — you should already have enough from prior payments. Reforecast your annual liability mid-year (around June or July) and adjust your Q3 and Q4 payments if income has shifted significantly from your earlier estimate. The Form 1040-ES worksheet walks through the mid-year recalculation.
Federal estimated payments go to the IRS; state payments go separately to your state revenue department. If you live in a state with no income tax, this step is skipped. In states with income tax, the required quarterly payment schedule and minimum payment thresholds vary — some states follow federal safe-harbor rules, others use their own. Your state's department of revenue website (linked from irs.gov/businesses/small-businesses-self-employed/state-government-websites) has the details.