If you’re self-employed you should pay quarterly taxes. I’ve been able to get away with not doing that until now because my self-employment income was relatively small and my total income was very small so that with credits and deductions I owed very little or got a refund. I thought about paying estimated taxes in 2012 since my online income had increased quite a bit. After the Google hit in spring though I figured my income wouldn’t add up to much and my tax bill wouldn’t be too high. I did claim zero exemptions on the W-2s for my jobs and contributed to a traditional IRA to help reduce my tax bill. That wasn’t enough though and now I’ve got to pay $1500 all at once. It definitely hurts more to make one big payment then to have it taken out gradually over the year. Luckily, I do have a decent paying job so coming up with the money won’t be a problem. I just won’t be able to save any money this month.
This should be a lesson learned that I should pay my taxes quarterly. However, I do expect my online income to be smaller this year and I am having more withheld from my jobs so I once again do not plan on paying estimated taxes. If my online income increases substantially this year then I will reconsider whether I should pay estimated taxes.
Just a quick tip. Estimated taxes are REALLY easy. You just take the total of what you owed the year before and divide by 4. Then send that in by the due date each quarter with the little form (slip of paper) that you use to tell them what you are sending. As long as you pay 100% of what you owed the year before, there is no penalty even if you double your self-employed income and owe a lot more than you thought in April. At least, that is how it reads and it seems to work for us.
I didn’t think they would be too difficult, I just didn’t think I needed to bother with them. My online income will be a lot less this year so I don’t expect to have the same problem again.