Self employed

Hi Cheryj48,

Thank you for participating today. To know how much tax you owe you have to estimate it as best as you can. Here is a link to a Tax Calculator called Tax Caster that may help:

Tax Calculator 2022 

When you are considered self-employed you are required to estimate and pay your taxes in quarterly. Click here for an article that explains estimated taxes.

Individuals, including sole proprietors, partners, and S corporation shareholders, generally have to make estimated tax payments if they expect to owe tax of $1,000 or more when their return is filed.

You don’t have to pay estimated tax for the current year if you meet all three of the following conditions.

• You had no tax liability for the prior year
• You were a U.S. citizen or resident alien for the whole year
• Your prior tax year covered a 12-month period

There is a safe harbor rule for estimated tax that has three components:

Generally, an underpayment penalty can be avoided if you use the safe harbor rule for payments described below. The IRS will not charge you an underpayment penalty if:

• You pay at least 90% of the tax you owe for the current year, or 100% of the tax you owed for the previous tax year, or
• You owe less than $1,000 in tax after subtracting withholdings and credits

This rule is altered slightly for high-income taxpayers. If the  Adjusted Gross Income on your previous year’s return is over $150,000 (over $75,000 if you are married filing separately), you must pay the lower of 90% of the tax shown on the current year’s return or 110% of the tax shown on the return for the previous year.

Your state will also have estimated tax payment rules that may differ from the federal rules.