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?
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
- 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:
- 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.