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I've earned a significant amount of 1099 income (self-employed) in the first quarter of 2014 (through 3/31/2014), but as of now, I have no idea what (if anything) I will earn for the rest of the year. How should I handle this situation to avoid penalties? I know you can use the "annualized method" and pay taxes on what you earned per quarter. Under this method, if I earn $0 in the second quarter, would I just not send in a voucher? What if I don't earn any additional income until the 4th quarter? Would I just send no voucher for Q2 and Q3?

Thank you for any tips you may have.

  • What is 'significant?' In finance, that's a word with no meaning. The Q1 number and general forecast for the year will help you get a good answer. – JoeTaxpayer Apr 12 '14 at 16:17
  • $25K. It's very hard for me to estimate the income for the rest of the year (it could be $0) – Mr.Kinn Apr 12 '14 at 16:39
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    What was your total tax in 2013? If you had less tax liability last year than you expect to have this year (i.e. less than or around $25K in income), you could just use that number. From pub 505: "General rule. The total amount you must pay is the smaller of: 1. 90% of your total expected tax for 2014, or 2. 100% of the total tax shown on your 2013 return. Your 2013 tax return must cover all 12 months." – Phil Sandler Apr 12 '14 at 17:18
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    @PhilSandler - you have a good answer right there. Too good for just a comment. – JoeTaxpayer Apr 12 '14 at 17:32
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What was your total tax in 2013?

If you had less tax liability last year than you expect to have this year (i.e. less than or around $25K in income), you could just use that number.

From Publication 505:

General rule. The total amount you must pay is the smaller of:

  1. 90% of your total expected tax for 2014, or
  2. 100% of the total tax shown on your 2013 return. Your 2013 tax return must cover all 12 months.

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