When I was a contractor, it was essentially as if I was working freelance. As such, I had to pay Federal Taxes in quarterly installments. So every 3 months, I had to pay 25% of my projected taxes. Well, I didn't HAVE to. If you didn't pay quarterly, you could also pay all at once in April like normal. Paying $2000 every 3 months was a lot easier than $6000 all at once, though! Of course, this is taxes from the US... other areas of the world are obviously different. EDIT: Same in the US, if you make below a certain amount, you don't have to pay taxes on it.