Do you pay estimated taxes? What methods do you use to estimate what you need to pay in?

I need to track this carefully as we may need to begin paying estimated taxes this year but I am unsure of how to accurately watch this.

 Brandy, we pay estimated taxes and I use the estimate from Turbotax. If I think that we are going to increase income then I will add some to their estimate. This is the worst thing about self employment.  I sometimes add more to the final Jan payment if I know we add a huge increase. Dont want to pay a penalty for under payment.  Babs

 I am not able to factor the estimates off of 2007's return. According to the IRS site, if one expects to owe more than $1,000 then estimated taxes need to be paid but if it's less then it's not required. We owed less. 

But my husband was given a raise that will increase his income. I have no idea what the expenses will actually be so it's hard to determine that right this moment.

My research has me thinking that I could track the income and expense so that if we begin to owe enough to need to pay the estimated taxes, I can make arrangements to begin those at that point.

 I pay estimated taxes. Even if you don't need to pay estimated taxes, it might be wise to start anyway. It eases the burden if you don't have to pay it all at the same time. You can readjust the amount any time and even though they like you to pay quarterly, you don't absolutely have to. You can pay a month late or a month early or skip one altogether if it looks as if you're going to overpay. 

All that said, I have a tax accountant because my taxes are too complicated for me to feel comfortable doing them.  

Edited to add that you may have to pay a penalty on underestimated taxes or taxes paid late. The IRS has an extensive online site that is very helpful.  

Pat:

Edited to add that you may have to pay a penalty on underestimated taxes or taxes paid late. The IRS has an extensive online site that is very helpful.  

 This is why I want to be careful of the figures so I can start paying in. 

A little late, I know, but I wanted to add that you don't have to pay the penalty for failure to pay estimated tax if the tax you pay this year is 110% of the tax you paid last year. Doesn't help the problem of it being a "bite" all at once, but it can cut out the penalty.

We've also upped my husband's wihholding a bit since he's not self-employed. Somehow it's less painful if you never see the money. Of course, we'll need to adjust that if our refund is large -- I'd much rather we got the interest on our money for a year than the IRS getting it.

This is my first year of full-time self-employment, so I know how you feel. But I've been doing it part-time for years, so at least I'm not trying to figure out the rules -- just trying to estimate income is stressful enough!

Luckily, we were not hit with a penalty but we are supposed to estimate b/c we paid over $2000 in taxes for the 2006 tax year (yes, don't ask, capital gains). We decided to not estimate for this year as we are not selling any stock in 2008 and should actually get a refund or come close to zero. We actually didn't "sell" any stock but some stock my DH owned was called in with a sale of a company. So the stock sold, we got cash and a huge capital gains on which we had to pay tax.

We also upped our withholding since we hadn't done that in years.

I know my reply doesn't relate to self-employed but I agree that estimating taxes quarterly is a good idea if you know you will have a larger tax bill in April. However, since the stock sold in December, we couldn't really estimate throughout the year--our financial advisor actually was surprised it was called in at all since companies were merging and she thought we would just be issued shares of the stock in the new company. (Phone utility). We just took a hit and had to pay for it.

My dh taxes aren't a problem but last year because I started working, I ended paying about $250 in taxes.  I make under the min. taxable amount a year but when I add the homestay student payments then it was over.   There was deductions but not enough.  So after tax time and paying, I asked my boss to start having $25 of tax coming out per payperiod on top of any other tax deducted.

It should cover me and if not needed I will get it back.