Hi MRT68,
Thanks for the question. The IRS requires that taxes be paid on a regular basis when earned. Since you are considered self-employed, you are required to pay your own social security and medicare taxes. In order to prevent having to pay an estimated tax penalty, you should consider paying estimated taxes. An easy way to calculate the tax is to total all Income received and expenses you were required to pay while earning the income. The difference between the two is considered your profit for the year!
The estimated taxes for the year can be considered by using this simple formula:
Income - expenses = profit or loss.
The self-employed taxes would be calculated this way:
Profit x .1412955 = SE Tax(Social Security and Medicare)
The estimated taxes paid quarterly would be SE Tax(from above) divided by 4
The tax based on the self-employed income is also a consideration and should be included in your estimated tax payments. See IRS Publication 15-T
Wage bracket method
The wage bracket method is a simpler method, and it tells you the exact amount of money to include based on your self-employed taxable income, number of allowances, marital status, and pay period.
It does not involve any calculations to determine federal withholding tax.
Determine the your Taxable Income: This is the gross pay minus any tax deductions (like health insurance premiums or retirement contributions).
Identify the income Period: Determine when the income is paid: weekly, bi-weekly, semi-monthly, or monthly.
Find the Correct Wage Bracket Table: Use the IRS Publication 15-T, which contains the wage bracket tables. These tables are organized by payroll period and filing status (single, married, etc.).
Locate the Wage Bracket: Find the row in the table that corresponds to the your taxable wages.
Determine the Number of Allowances: find the column that matches the number of allowances claimed.
Read the Withholding Amount: The intersection of the row (income) and column (allowances) will give you the amount of federal income tax to withhold.
Total these amounts for the year, divide by 4, and add to your estimated payment.
You'd want to submit the quarterly payment as shown on Form 1040-es.
https://www.irs.gov/pub/irs-pdf/f1040es.pdf
Thank you for allowing me to answer this question.
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