@TomYoung @Carl Thank you both kindly for your thoughtful replies and for helping me navigate this (what I consider, rather hairy) situation.
Carl, thanks for walking me through your "self-imposed 20% rule" .
Be aware that the SE tax is basically paying 12.4% of the SE tax to "MY" social security account. 6.2% is the "employee" contribution and the other 6.2% is the "employer" contribution. I look at it as paying my "future self" for social security which I will get when I reach retirement age. The remaining 2.9% of the SE tax is the Medicare tax that goes into the Medicare general fund.
I did not know that! So would all the SE taxes go into MY social security account and accrue my balance, and (if social security is still around) will I be able to claim it?
Finally, if your state also taxes personal income then you must also send quarterly payments to your state. The highest state tax rate I am aware of at this time is California at 13.3% on personal income. So in that first year of business you should send your state a percentage of your gross income that is equal to the highest tax rate of your state. Then in later years you can lower it as appropriate.
Thank you, I had forgotten about this. The tax man strikes again, I guess :( And yes, sadly I am in California and will be paying 8-12%
Tom, thanks for clarifying that the Q3 rate is 3%, not 5%, and you are right, turns out that if I pay now, the interest penalty is not a hell of a lot of money ($500 combined for federal and state)...so I am less worried now! Still, I will make my payment immediately.
By the way, for paying the IRS, do you recommended to use:
- Electronic Federal Tax Payment System (EFTPS).
- Treasury Department is Direct Pay
Where do I get / print the vouchers from? Is there a way to do this from within TurboTax?
Thanks again.
