How do I compute estimated tax payments?

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.

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