Are you withholding taxes at any source?
Does your Form 1099- NEC show Federal income tax withheld?
I your income is rising you may be falling under a safe harbor where your tax withheld exceeds the prior year tax liability.
If none of the above is true, are you seeing an underpayment penalty on your tax return each year?
If you have been incurring an underpayment penalty, I recommend the following cook book:
- Set a time each month for your "Board Meeting"
- For example, third Sunday of the month 4 PM to 5:30 PM
- Keep track of your revenue and expenses in a file folder
- The major miss for self-employed taxpayers is failure to track expenses
- At the end of each month, total up your profit
- You will owe 15.3% self employment tax on the profit
- You will also owe income tax on the profit, most likely at your Marginal Tax Rate
- You can locate your Marginal Tax Rate at the bottom of your 2022 Tax History Report in TurboTax
- So if you are in a 12% marginal tax bracket, you add 12% plus 15.3% and deposit 27.3% of your profit in accordance with IRS "When to Pay Estimated Tax":
January 1 through March 31 period, make deposit on April 15
April 1 through May 31 period, make deposit June 15
June 1 through August 31, make deposit September 15
September 1 through December 31, make deposit January 15
