How do I calculate self employment taxes when I cannot estimate from last years taxes?
Thursday, April 15th, 2010 at
9:24 pm
My dh started working for himself at the beginning of this year. He has never worked for himself before. All the tax information states to estimate based on last years taxes but he makes a totally different amount this year and its not steady income. How do I estimate how much to save out for taxes?
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Look at his pay, subtract out expenses, plan on 30% of what’s left for taxes. Send that money in on 4/15 (late, but still do it) 6/15, 9/15 and 1/15 of 2009. Plan on using a preparer and to ask the preparer to fill out form 2210 since is income isn’t steady.
To avoid the estimated tax penalty, if his income is higher than 2007, at least send in 1/4th per quarter of what you owed for 2007. To avoid owing tax at tax time, plan on that 30%.
teehee
It does not matter if your current income is many times than the last year. For estimated taxes, you can pay quarterly installments of 1/4 of your tax on your last year’s return.
Read more about self employed tax filing: http://taxipay.blogspot.com/2008/04/tax-filing-by-self-employed-sole.html
One easy way would be to fill out a return using the 2007 forms but the numbers that he expects to earn this year. It won’t be exact but will be close.