Estimated tax is the method used to pay tax (including SE tax) on income not subject to withholding. An individual must make estimated tax payments if the individual expects to owe tax, including self-employment tax, of $1,000 or more for the year. A person who is both self-employed and an employee, can avoid paying estimated tax by having the employer increase the income tax taken out of wages using Form W-4, Employee’s Withholding Allowance Certificate. There are penalties for underpayment of estimated taxes.
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