Advice On Estimated Taxes
Hi,
I am new to this forum and hope someone can help me with my question. 
Here it goes: In March I started to work part-time as a freelance graphic designer for a small firm. I make about $900 a month with that and it's my only source of income right now. I understand that I will have to pay income and self-employment taxes out of that money and I calculated it to be about 15%. Does that sound right? Someone told me it can be as much as 30%.
Anyway, what I really don't know is if I have to file for quarterly estimated taxes or not...
I read through the 505 publication but it is way complicated. My situation: The 1040ES says that "You do not have to pay estimated tax if you had no tax liability for the full 12-month 2003 tax year". I did not have any income in 2003 because I wasn't working. Me and my husband filed a joint tax return however and got a refund for that. So does that mean that I don't have to worry about paying estimated taxes this whole year, or do I?
In case I have to pay estimated taxes can I file the 1040ES as single and still be able to file a joint tax return at the end of the year?
Regarding estimating your tax... I only worked as a freelancer 1 month in the first quarter. I understand that all quarterly payments must be equal (?). Do I just calculate the expected income for the whole year and devide it by 4 - even though I don't earn the same amount each quarter?
I am really confused about what one is supposed to do if they're not sure if the income is going to be steady. It may well happen that I will not work as a freelancer this whole year, or it may happen that they decide to increase my payments at some point. I estimated that I will owe about $1300 in taxes if I keep working there the whole year. But it may well not happen. So is it wise to just go ahead and pay the quarterly estimates, even though I may end up owing less than $1000 at the end of the year?
I just want to know what I need to worry about now. Thank you!
Your self employment tax is about 15% of your net business income, that is, income less your business expenses. You do get to deduct for federal tax purposes half of your SE tax. Your effective tax rate on your self employment income will be based on what your husband makes. If he is indeed paying any net federal taxes (total taxes withheld less his refund), then you are in at least the 15% tax bracket, so you will owe another 15% on your self-employment (SE) profits (after deducting half of your ~15% SE tax. The SE tax covers your FICA tax and your Medicare tax.
Hi, Joe
So you are saying they will take 7.5% (half of 15%) for income tax, PLUS about another 15% for SE tax... Meaning I need to put aside about 25% of what I make to be safe?
I still don't know whether I need to file for quarterly estimated taxes or not.