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.

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