1

There's no penalty if you

Submitted by Catherine Shaffer on March 25, 2008 - 07:15.

There's no penalty if you underpay for the first time this year. If you are transitioning to freelancing from a regular job, you should have easily paid the required 90% of your liability in withholding from your paychecks. The second year, as long as you pay the amount on your vouchers (your accountant or tax software will create these for you, or you can use a worksheet to make them), you will not owe interest or penalty. As a practical matter, I earmark 20% of my gross for taxes, and that seems to work out well. My husband is a salaried employee and pays through withholdings, so a person with only freelance income should use a higher percentage making sure to cover income tax as well as the full 14% self-employment tax.

Catherine Shaffer

Wise Bread Contributor

Reply

Please keep the comments civil and on-topic. Abusive or inappropriate comments will be removed without warning. By posting here you agree to our terms of use.

The content of this field is kept private and will not be shown publicly.
If you leave a link (include the http:// part), your name will be linked to your homepage.

You may use some HTML for formatting: <strong>bold text</strong>, <em>italics</em>, and <a href="">for links</a>. Empty lines are automatically converted to paragraph breaks.

Or click the link above that says 'enable rich-text' to use the fancy editor.

Captcha
This question is for testing whether you are a human visitor and to prevent automated spam submissions.
4 + 6 =
Solve this simple math problem and enter the result. E.g. for 1+3, enter 4.

Have more to say? Join the discussions at Wise Bread's Finance and Frugality Forums.

Finance Blogs - Blog Top Sites