Working for yourself can be a nice setup. You run the show and you don’t have to answer to anyone. But being your own boss also means you have to take care of all your taxes, unless you hire a professional to take care of that for you. In either case, though, most self-employed people are responsible to make quarterly estimated tax payments.
Important Due Dates
So when are those payments due? The first two have already come and gone, so if you missed one, you better get caught up. The due dates for the year are:
Payment Period Due Date
January 1 to March 31 April 17, 2018
April 1 to May 31 June 15, 2018
June 1 to August 31 September 17, 2018
September 1 to December 31 January 15, 2019
If you have a steady income each payment period then your estimated payments will likely be the same. If your income fluctuates, chances are your payment amounts will too. That’s good news if you’ve missed a payment already. You can make up the difference when the next due date rolls around and you should still be OK come tax return time. Just make sure you’re completely caught up at the end of the year when your last payment is due. If not, the IRS could make you pay.
If you owe more than $1,000 at the end of the year then you will likely be penalized. There are some exceptions, and the IRS doesn’t always assess a penalty, but why leave it to chance. The exceptions are: 1) You earn less than $150,000 and you paid 90 percent of your tax burden for the current year or you paid 100 percent of the previous year’s tax bill; or 2) You earn more than $150,000 and you paid 90 percentor moreof yourtax burden for the current year or you paid 110 percent of what you paid the previous year. Self-Employment Income tax Threshold Some self-employed workers that don’t make very much income might think they have nothing to worry about, especially if the income comes froma side job. But the truth is it doesn’ttake much self-employmentincome to owe the IRS taxes. That’s because the IRS expects you to pay taxes on any self-employment income above $400. No One Is Immune All taxpayers, both self-employed and company-employed, must pay the combined Social Security and Medicare taxes. This amounts to 15.3 percent: 12.4 from Social Security and 2.9 from Medicare. However, workers employed by companies only pay half of this amount, while the company picks up the other half. Self-employed workers have to foot the entire bill. Therefore, if you work for yourself, the safest bet is to put aside about 30 percent of every dollar youmake for taxes. You could get a refund,and if nothing else you protect yourself from a penalty for underpaying your tax burden.