Congratulations on taking the big step to self-employment. Good luck to you!!
Regarding self-employment tax estimates, you have two times of tax: self-employment tax 15.3% and income taxes. Let's take these two separately:
1) Self-employment tax is based on your NET INCOME...not your GROSS INCOME. In your question you mentioned you showed income in May. Was that NET INCOME or GROSS INCOME. If that was net income and you expect that level of NET INCOME to continue, then multiply that number X 3 for a quarter and that is your estimated Self-Employment tax. In your first year, it is not a critical you make these estimated tax payments as it is after you have some experience and history with this
2) Income tax: In addition to self-employment tax, you have to pay income tax based on your level of total income for you and spouse (if joint return). Many factors go into determining this tax amount. But a safe rule of thumb is to pay 20% - 25% of your NET INCOME as an estimated tax payment. Again, in the first year, you get some leniency if you have underpaid. But if you don't want to be surprised with a big tax bill...because you are so successful!!! then budget that amount and you will be well served.
In terms of HOW to make the payment, tax agencies (IRS and States) make it very easy to receive your money...and not so easy to pay you money...so, you can go online to make payments or write a check, put your social security number on the memo, also write :for tax year 202x, Q1 or Q2 payment. Make a copy of the check when you send it. And a copy of back and front when it clears. And stick it in your file.
I hope this was helpful. I apologize for its length. But paying taxes is such a fun and interesting topic..isn't it?? 🙂
Good luck again.
Kelly C, CPA
