Did you know that if you make a large enough income and do not pay taxes quarterly you can get fined?

The US Federal Government expects the self-employed and sole proprietorships to pay their taxes throughout the year instead of just at the end of the year.  If you expect to pay $1,000 or more annually in taxes (includes self-employment tax), then you need to estimate your taxes and pay them quarterly.

General Guidelines:

  • You must pay the self employment tax if you earn more than $400 per year.
  • The self employment tax rate is 15.3% (12.% for social security, 2.9% for Medicare).
  • The maximum earnings subjected to the self employment tax is $94,200.

Refer to “Self Employment Tax” (IRS) for information on how to pay your estimated taxes.

Paying State Estimated Taxes

Besides your federal obligation, in most cases, you have to pay estimated taxes to your state as well or you may incur fines.   Many states require you to pay an unemployment tax as well as an income tax.

Go to your state’s website to find out how to apply and pay your state taxes.