1. You can base your estimated taxes on your Net income, since this is the amount that you will be taxed.
2. Yes, you must use calculate your estimated taxes with the social security/Medicare taxes on the self-employment income- however, you can use 7.65% instead of the 15.3% because you do get an adjustment to income.
3. The total social security./Medicare taxes you pay when you file your tax return are reported to the Social Security Administration so you will will full credit when you retire. It is a good idea to check every year to make sure you have the correct amounts credited, because it is much easier to resolve any issues earlier rather than finding out ten years later there was an error.
4. It is usually better to base your estimated payments with the deductions because it does encourage you to keep up to date on your records, and in many cases you will be paying a lot more in estimated payments which is not efficient (it is a tax-free loan to the government).
5. You can make the adjustments each quarter; it is your personal choice.
6. The safe harbor rule allows you to use your current year tax liability to avoid the underpayment of estimated taxes penalty. 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 (AGI) 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.)
You can also use the IRS Tax Withholding Estimator.
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