One of the very common problems for the self-employed is the failure to make estimated tax payments to cover their Self-Employment tax. The rate of these taxes is 15.3% and consists of 12.4% for social security and 2.9% for medicare. The former is applied to the first $94,200 of the combined income, while the latter applies to all income.
The IRS form 1040ES is a worksheet that helps self-employed individuals figure out their taxes.
It is important to notice that the Estimated Tax Payments are paid every quarter and are due on the following dates:
1st Payment: April 15
2nd Payment: June 16
3rd Payment: September 15
4th Payment: January 15
Partial payments, late payments or no payments will be subject to penalties.
Form 1040ES has a payment voucher that is sent in along with each payment so that it is properly applied. As always it is imperative to work with a competent tax representative to walk you through the process.