You can still average your taxes across the years if you're a contractor, by paying taxes in advance - with a simple accounting trick that nobody seems to be aware of:
1. In the first year, suppose you and a corporation (you own this corporation outright) makes no income.
2. In the first year, you make a loan to your corporation ($50k for instance)
3. In the first year, you also pay yourself a salary of $50k. You pay taxes on this "income". Yes, you're paying taxes on money you didn't really truly actually earn yet.
4. In the second year, suppose your corporation makes $100k of income. Your corporation repays your $50k loan. The loan repayment is tax-free, and the remaining $50k then becomes your salary for the year.
If you do not actually have $50k to perform steps 1-2, you do it repeatedly with small bank transfers until you've accumulated enough "loan" and enough "salary".
You then effectively pay two years of $50k income, instead of one year of $0 income and one year of $100k income.
1. In the first year, suppose you and a corporation (you own this corporation outright) makes no income.
2. In the first year, you make a loan to your corporation ($50k for instance)
3. In the first year, you also pay yourself a salary of $50k. You pay taxes on this "income". Yes, you're paying taxes on money you didn't really truly actually earn yet.
4. In the second year, suppose your corporation makes $100k of income. Your corporation repays your $50k loan. The loan repayment is tax-free, and the remaining $50k then becomes your salary for the year.
If you do not actually have $50k to perform steps 1-2, you do it repeatedly with small bank transfers until you've accumulated enough "loan" and enough "salary".
You then effectively pay two years of $50k income, instead of one year of $0 income and one year of $100k income.