Hello BN34,
Thank you for your question. I am happy to assist you.
First question: will you get penalized if you don’t pay estimated taxes? Yes, you may be charged a penalty if you do not pay enough taxes through your withholding on form W-2 and estimated taxes. Even though you have additional taxes taken out of your paycheck from your full-time job, the total tax liability that you owe may be higher especially if you performed contract work. Being self-employed (SE) means that you must pay self-employment tax each year if your net earnings from self-employment are $400 or more. The SE tax is 15.3% (12.4% for Social Security and 2.9% for Medicare) on the annual net income you derived from your business. Higher income business owners must pay an additional 0.9% on Medicare tax.
In addition, SE people must pay income taxes on your personal taxes (these taxes are called “pass-through taxes).
Second question: how do you estimate how much you are going to owe? You can use the following links to get more information on estimated taxes and how to calculate the tax withholding amount:
https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes
https://www.irs.gov/individuals/tax-withholding-estimator
https://turbotax.intuit.com/tax-tools/calculators/taxcaster/
Please let me know if this answers your questions, or if I can be of further assistance.
Thank you!
Shirleyh88
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
