Question

I have a question about reporting self-employment income. How much self-employment income do I need to earn before having to pay quarterly estimated taxes?

Answer

Regarding reporting self-employment income, you usually must make estimated tax payments if both of these apply:

  • You expect to owe tax of $1,000 or more when reporting self-employment income on your return.
  • You expect your withholding and credits to be less than the smaller of:
    • 90% of the tax you paid on last year’s return (110% of the tax you paid if your adjusted gross income (AGI) for last year was $150,000 or more — or $75,000 if you’re married filing separately)
    • 90% of the tax you estimate on your current year return (66 2/3% for farmers and fishermen)

Estimated tax is the method you use to pay tax on income not subject to withholding, including:

  • Self-employment income
  • Interest
  • Dividends
  • Alimony
  • Rent
  • Gains from asset sales
  • Prizes and awards

You also might have to pay estimated tax if the amount of income isn’t enough that you’re withholding from your:

  • Salary
  • Pension
  • Other income

Estimated tax is used to pay both income tax and self-employment tax, as well as other taxes and amounts on your return. If you don’t pay enough by the due date of each payment period, you might be charged a penalty. This applies even if you’re due a refund.

Your self-employment income minus expenses might be $400 or more. If so, you’re required to file Schedule SE to calculate self-employment taxes.

Related Topics

Related Resources

Taxes for Flipping Houses

Learn more about flipping houses tax deductions with the help of H&R Block. We break down what expenses you can deduct when flipping a house here.

CARES Act waives 2020 Required Minimum Distribution (RMD) for retirement investors

Not sure if you have to take your required minimum distribution (RMD) in 2020? H&R Block’s experts explain how the CARES Act lets you suspend your 2020 RMD.

Sale Expenses from the Sale of Stocks

Learn more about the sales expenses associated with the sale of stock and how to report it on the tax form 1099-b from the tax experts at H&R Block.

Taxes on Prize Winnings and More!

When you come into surprise money, you have to pay taxes on prize money. Learn more with the tax experts at H&R Block.