Let’s say you change from employee to self-employed at mid-year. You’ll need to make estimated payments to avoid penalties and interest. Here’s what to do:
- Find the amount for “Total Tax” on page 2 of your prior year tax Form 1040.
- Multiply by 110%.
- Subtract the total federal income tax withheld on your paystub from this number.
- Divide the result by the number of estimated payment dates remaining in the year
- Send in a check for that amount each due date.
Here’s a link to the IRS fillable 1040ES forms for 2016, along with instructions, due dates, & mailing addresses.
State laws will vary.