What Are Quarterly Estimated Taxes?
W2 employees have taxes withheld from every paycheck automatically. Self-employed workers have no employer to do this, so the IRS and Michigan require them to pay taxes four times per year in estimated installments. Missing these payments results in underpayment penalties even if you pay the full balance at tax time in April.
2026 Quarterly Payment Deadlines
- April 15, 2026 — Q1 payment (January 1 – March 31 income)
- June 16, 2026 — Q2 payment (April 1 – May 31 income)
- September 15, 2026 — Q3 payment (June 1 – August 31 income)
- January 15, 2027 — Q4 payment (September 1 – December 31 income)
Michigan follows the same quarterly schedule for state estimated payments using Form MI-1040ES.
How to Calculate Your Payment Amount
There are two safe harbor methods to avoid underpayment penalties:
Method 1 — Prior year safe harbor: Pay 100% of last year's total tax liability in four equal installments (110% if prior year income exceeded $150,000). This method is predictable and safe regardless of how this year's income changes.
Method 2 — 90% of current year: Estimate your current year tax obligation and pay 90% across four installments. This requires estimating your income, which can be difficult with variable freelance revenue.
FHR recommends Method 1 for first-year freelancers or anyone with unpredictable income. Use FHR's SE Tax Calculator to estimate your total annual obligation and divide by four for equal payments.
How to Pay
Federal payments: Pay online at IRS Direct Pay (irs.gov/directpay) — free, immediate, and provides confirmation. You can also pay by check using Form 1040-ES vouchers.
Michigan payments: Pay online at michigan.gov/treasury using the Michigan Treasury Online (MTO) portal, or by check with Form MI-1040ES.
Detroit city tax: Detroit does not have a formal quarterly estimated system. Most Detroit freelancers pay city tax with their annual return in April, though you can make payments earlier to avoid a large April bill.
What Happens If You Miss a Payment?
The IRS charges an underpayment penalty calculated daily on the amount you underpaid. For 2026, the penalty rate is the federal short-term interest rate plus 3 percentage points. The penalty is relatively small compared to the total tax but grows with the size and duration of the shortfall. If you miss a payment, make it as soon as possible and pay the remaining quarters on time.
Setting Aside Money Throughout the Year
FHR recommends a percentage-based approach: when any client payment arrives, immediately transfer a fixed percentage to a dedicated tax reserve account. A combined federal, Michigan, and Detroit tax reserve of 27-32% of gross income covers most Detroit freelancers' obligations. Adjust based on your actual tax bracket and deductions. For a detailed worked example, see FHR's guide: Detroit 1099 Tax Breakdown.
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