How do I calculate my estimated taxes?

Question

I am self-employed (earnings on a 1099 instead of a W2) for the first time in my life. I know I have to file estimated taxes for the second quarter of 2007, but I don't know how much. I already earned some W2-based income this year (I know exactly how much). My 1099-based earnings have no relation to what I earned in 2006 (all W2 based and from a different job), and I did not earn any 1099 amount in the first quarter, and the second quarter amount will probably be very different from what I will earn in the third quarter... What is a simple method to figure my estimated taxes?
The IRS documents don't seem to help much - the worksheets seem to base everything on what I earned in 2006.

Answer 1

In addition to Steven's answer, be sure to add 15.3% for your self employment tax (social security) besides what you would owe for federal income tax. And, if you live in a state with income tax you may need to pay estimates to the state also.

Answer 2

Exactly.... Just go by your 2006 taxes and add 10% more.... this should come out to be pretty close... the Irs uses the assumption every thing stays the same from year to year with a slight increase.... also you have to pay your own Social security tax in, but if you had self employment last year then it was already added in... otherwise take one half of your total 2006 tax and add it to the amount you already figured with the 10%... I know it is confusing... When you do the worksheets just remember to do it one line at a time.... they have it set up perfectly so that all things are taken into consideration.

Answer 3

Can you make a good estimate of your total 1099 income for 2007? If you can, pretend you earned that amount in 2006 and complete the worksheets with those numbers. It should come close. If you still have a W-2 type job, you can increase your withholding to cover the amount you would pay in estimated quarterly payments. That would allow you to avoid actually making quarterly payments.