How much money should I be earning before required to pay quarterly tax?

Question

I asked a question on here a few weeks ago, to much success - so now I only have 1 last thing that is confusing me.

I work a full-time job, and now I have started doing a few website design jobs here and there for extra money.

Someone in my last questioned mentioned if i 'start making a bunch of money at this' then I will have to start making quarterly estimated tax payments.

How much exactly is a 'bunch of money'?

Is it when I am getting regular work from the web design? Is it when a certain percentage of my income is from said web design? Or is is a specific dollar amount?

I'm just trying to be legal here and the government is making it very hard for my to understand how to do so. Ha!

Thank you in advance!

Answer 1

1. If your withholding for 2007 are going to be more than your tax for 2006 (for 12 months period), you need not worry about making estimate tax payments. (Exception: If your total income for 2007 exceeds $150,000, then your tax payments should be minimum 110% of your tax for 2006.)

2. For 2008 income, divide your taxes for 2007 by four and send quarterly payment equal to that amount.

3. Here is the info about estimated taxes
You must pay estimated tax for 2007 if both of the following apply.
I. You expect to owe at least $1,000 in tax for 2007 after subtracting your withholding and credits.
II. You expect your withholding and credits to be less than the smaller of:
*90% of the tax to be shown on your 2007 tax return, or
*100% of the tax shown on your 2006 tax return. (110% if your AGI is more than $150,000 or $75,000 for married filing separately). Your 2006 tax return must cover all 12 months.

Answer 2

Unfortunately, it's a bit complicated to figure out. The following is directly taken from this year's federal estimated tax form.

Estimated tax is due if you expect to owe $1,000 or more (after subtracting withholding and credits) and you expect your withholding and credits to be less than the smaller of:

a). 90% of the tax shown on your 2007 return, or
b). 100% of the tax shown on your 2006 return (with some exceptions for high income filers)

B. does not apply if you did not file a return in 2006 or if it covered less than twelve months.

Answer 3

If you are going to owe more than $1000 in taxes when you file, you should either make quarterly payments or increase your withholding at your job. The IRS doesn't care which way you pay in the money, but will penalize you if you owe more than $1000 when you file your tax return, even if you pay it all with your return.

Remember that on your side jobs, you'll pay about 14% for self-employment tax for social security and medicare, in addition to whatever income tax you owe.