suppose i only made $7000 in 2002 as a contractor and paid no taxes. 
does that mean i don't have to file any tax forms for the first
quarter of 2003 since i paid no taxes in 2002?

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Request for Question Clarification by davidmaymudes-ga on 15 Apr 2003 13:11 PDT

did you owe no taxes for 2002, or are you saying that you just didn't
pay them, and/or didn't file?

even if your income was low enough that you didn't owe federal income
tax, if you earned $7000 as a contractor, I would think that you would
owe around $1000 in self-employment taxes (social security +
medicare)....

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Clarification of Question by whitney-ga on 15 Apr 2003 13:15 PDT

right, i don't owe federal income tax for 2002 but i suppose i owe
self-employment tax (i haven't filled out my SE form yet), so i guess
my question is do i have to file a 1040-ES for the first quarter even
though i paid no federal income tax in 2002 (even though i may have to
pay some self-employment tax for 2002).

my really-quick calculation is if you have $7000 in business income
(after deductions for expenses) you'd owe $989 in SE tax.

so, for next year, if you earn any more than just about this, you'd
have a total tax liability of >$1000 including the SE tax, so, in
principle, you need to make estimated tax payments equal to either 90%
of your 2003 liability or 100% of your 2002 liability, or about $1000
for the year.

now, if you don't make them, I think the penalty for not paying that
$1000 in advance is about $37, at least according to this year's form
2210, so you can balance that cost against the time & effort required
to make estimated tax payments.

note, of course, that I am not a lawyer or an accountant, so you'll
have to make your own decisions.  much more information can be found
in IRS publication 505 at http://www.irs.gov/pub/irs-pdf/p505.pdf,
which says you "MUST" make estimated tax payments if you expect to owe
more than $1000, but I think that only means that "if you don't, you
may be required to pay a penalty", not "if you don't, we will throw
you in jail".

note also that if you don't have any income yet for 2003, you
definitely don't need to pay estimated tax yet; you can wait until the
quarter when your projected income for the year will be enough that
you will owe tax over the $1000 threshold.

let me know if you have further questions!

--David

thanks.

A statagy that sometimes works is to ask persons who make payments to
you to withhold some for income tax. Some can do this easily and the
total may be in the $600 to $1200 range, which means the amount owe
will be less than $400 on April 15 th. Typically this satisfies IRS
and you avoid making the quarterly returns and avoid penalties.
Businesses that pay you interest such as a bank, insurance company,
mutual fund typically can withhold some money for you.  Neil