How to figure self-employment tax?
Excellent point, JackFlash. Even if you have relatively little self-employment income, though, you may need to pay estimated taxes to avoid underpayment penalties. I’m in the (rare and partially of my own doing) situation this year where I’ll have to do estimated payments for any non-wage income I earn. krautland’s method may work if you have enough withholding from employee income (i.e., paid on a W-2 basis) to avoid underpayment penalties. It’s essential, though, to do the math to see what applies in your own personal situation, both because of underpayment penalties and because of the actual tax liability. For example, if you were in the 25% bracket based on wages alone and had a business on the side, you’d need to pay roughly 40% (25% income + 15.3% self-employment) on every dollar the business earns. However, self-employement taxes would drop to 2.9% as soon as you hit the FICA wage base, which is…well, you get the idea. Do the math.
What backupjesus said. “Quick and dirty” all depends on what the actual numbers are because there are multiple tax brackets. You are much better off using their form. I usually double-check my figures in January by plugging my actual year end numbers into a 1040-ES. I think there is one in Pub 505, linked above. If not it is downloadable from the IRS as a PDF. If I am substantially off, I can still avoid penalties by making an oversized Q4 Estimated Tax payment before January 15. Not that it helps you now, but worth thinking about next year.
