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I'm already in the independent contractor boat. So my next steps are to learn how to pay quarterly IRS payments (fun). Should I just follow the form or do I need to use a software tool to better calculate this stuff? My case is pretty simple, I'm a software developer making a typical amount, working 40 hours a week. My expenses are pretty common (just a laptop and probably nothing else) and not too frequent so whatever solution I use should account for calculating and listing those.

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You have to end up with at least 90% of your tax liability prepaid by the tax day. It doesn't have to be precise, I'm sure as a software engineer its not that hard for you to hit such a mark. –  littleadv Jan 10 '13 at 6:11
    
The other way to avoid penalty is to pay at least 100% of what you paid last year. If you'll make about the same annual income, this is an easy number to use, and near year end, do a dry run of your taxes to see if it will work for 2014 as well. –  JoeTaxpayer Jan 10 '13 at 13:03
    
Followup question to these commenters (@JoeTaxpayer and @littleadv): What if you are doing a little side contracting as a sideline to your main job? At what point (of earnings) do these IRS rules for pre-payment kick in? –  Chelonian Jan 10 '13 at 18:45
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When doing the return, it's not forgiving as to the reason for underpayment. If I had side income, I'd use withholdingfromthe main job to cover my total taxbill. i.e. adjust main job W4 to withhold enough to cover total bill. Make sense? –  JoeTaxpayer Jan 10 '13 at 19:00
    
@littleadv - on further reflection your comment was a valid complete answer. Else,we're all set, solved thru comments only. –  JoeTaxpayer Jan 12 '13 at 17:08
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1 Answer

The worksheet in Form 1040-ES walks you through the process beginning to end. It's comprised of 2 worksheets which total 30 lines and result with the sum you should pay.

In effect, you are asked to guess your full year earnings and perform some calculations as though you were filing a full tax return. If your first estimate is correct, you'll have level payments through the year. If your actual income varies, you may send in too much or too little for each quarter, and will adjust as you go. With a 4th quarter payment not due until January 15th, you get one last chance to make sure your payments are enough to avoid a penalty.

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