Littlechap: The subject of underpaying estimates, particularly for someone in a transition and providing little information, is at best confusing enough without guessing. You said:As for the underpayment penalty, the rule of thumb is that if you start making money in the first or second quarter -- but you aren't sure that it will yield a net profit for the year -- you do not face an underpayment penalty for failure to file estimated tax paymentsThe rules of the IRs are that you owe a penalty if you underpaid your taxes in any quarter.They have that name because they're supposed to represent your *estimate* of what your eventual tax obligation will be.I don't know what you meant by this.On the other hand, if you do make a ton of money from which no money has been withheld, and your expenses are minimal, then you should file the estimated payments as described in IRS instructions (www.irs.gov).It's too late if he followed your "Rule of Thumb" advice about what to do in early quarters. Also, lets give him a specific place to look. Get IRS form 2210 and its instructions, or form 1040ES and/or Publication 505 Back to ed's comment at the top - there seems to be some more confusion insofar as the 1099 is concerned. The 1099 is purely an informational form...... It's pretty obviouos from the OP's post that he is in a self employment situation (not collecting interest), didn't know what a Schedule C is, nor that his conferrence was a legitimate expense. And in all cases, you don't owe any taxes if 1)..... Let's keep it simple. Save this so you can just paste it into a future reply on the same subject ....if your withholding and installment payments in each quarter are more than 1/4 of your last year's tax (110% if last year's AGI was over $150K), or more than 1/4 of 90% of this years tax, or after withholding only they are within $1,000 of your current year's tax, you will owe no penalty. When all the withholding is in early quarters it is advantageous to NOT have withholding averaged over all 4 quarters. Those are the "safe harbor" rules and beyond that he should learn how to annualize his income and taxes if he wants to get though this year without a penalty.Also, I skipped over the "15% SE" Taxe issue, but it isn't accurate. Not when useing the last year's tax safe harbor, but when annualizeing or estimating 90% of this year's tax a lower factor can be used. For a married SE netting under 90K he only has to deposit estimates of .11127 of net Schedule C income which is the discounted rate on .9235 of income, after deducting the effect of a 25% tax bracket line 28 deduction, all times the safe harbor 90%. Or, if in the 15% bracket, .11763. ed
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