bostonianinmo:  You are liable Federal income tax, Social Security and Medicare, as well as any State income taxes. To avoid penalties for underpayment of estimated taxes you must pay in 100% of the PRIOR year's tax liability. Many tax pros just use the prior year's liability in calculating the estimated payments required for the current year. However if you do it that way, you MUST make sure that you set aside enough additional money to cover the tax debt when you file next year. You can download a copy of Form 1040-ES from the IRS website and use the worksheets that are included in the package to better estimate your true tax liability if you have good income projections for 2008. Paying in the extra will avoid the tax bill at filing time, but it is not strictly necessary if your only desire is to avoid any penalties and interest. It will tell you how much you need to set aside for April 15th of next year though. Personally I pay in 100% and set aside enough extra to pay the IRS when I file. That way I make a few extra $$$ in interest on that money until the bill comes due. Note: Not sure who the rube is that gave this a TD rating, but I've been doing taxes for over 40 years now and that's the way that it has ALWAYS worked.
2008-05-03 05:38:02

Jss:  Normally you pay quarterly 1/4 of the total tax on your 2007 tax return. Read this: http://taxipay.blogspot.com/2008/04/tax-filing-by-self-employed-sole.html
2008-05-03 06:04:37

Judy:  For your estimated amount, figure a net 14% for self employment tax, for social security and medicare, PLUS whatever income tax you expect to owe. And if your state has an income tax, don't forget a state estimated payment.
2008-05-03 08:34:55