how to file estimated taxes

Sounds like MFJ is sure the way to go here.

You will be paying income tax not on her 2500 income, but on the profit she reports on her schdule C or C-EZ. Roughly income less expenses will be her profit. If her profit is more than $433 she also pays Self Employment tax of about 14.1% of her profit.

Look at schdule C and be sure she is keeping receipts and good records using expense categories shown on schedule C, though feel free to add your own categories when necesaary. If she purchased any capital items (usually relatively costly equipment that contributes to the operation of the business and will last more than a year) she should probably talk to her tax adviser about how to handle the tax treatment, as she has options.

It could be that you (jointly) should be filing estimated taxes using form 1040ES. See IRS Publication 505 and the Form 1040ES instructions for details.

If you file a joint return then you pay estimated taxes jointly.

See

for the easiest way to make federalestimated payments. It takes about 2 weeks to set up an account, butit's free, so start now. Estimated tax payments for 2008 are due April 15 2008, June 15, September 15, Jan 15 2009 (where you need to pay 90% of the tax due), and the remaining 10% on April 15, 2009. Note that these are not true quarters -- some are 2 months, some are 4 months.

You'll have to do more research to figure out about VA taxes, but it will be similar to federal.

If you generally get a refund every year (say due to a house), then it means your withholding at work is too much and would likely cover taxes on this $2500 your wife earned. Otherwise you can increase your withholding at work or pay estimated taxes. If you pay estimated taxes with a different amount each quarter, you may have to track your income by quarter, which is a pain.

If you're in safe harbor, you don't have to worry about estimated taxes this year only.

Maybe talk to a tax pro.

NO. Let's stop right there.

Any one may file estimated vouchers and separately, too. You are not bound by whether or not you have in the past filed joint tax returns.

In this case, it is the wife who will be incurring added tax liability, so she should be the one to file her OWN estimated taxes under her OWN social security number. Then IF they decide to file jointly, the credit will be in place.

I admit it is sometimes easier for a tax pro to print out a default

1040 es using both names, since that's the way software is designed to "think", i.e. that the couple is happily married and will in the future continue to file jointly.

But .. still.... accidents happen! (grin)

ChEAr$, Harlan Lunsford, EA n LA

Sure.

And vice versa. Which is probably not the best type of vice.

In Ohio, I often file joint estimates when a couple has been and probably will file separate returns. This has the major advantage of preserving their flexibility to assign their individual estimated amounts as they mutually agree.

And Ohio tax folks have been able to understand that for several years now.

But IRS not only doesn't understand that there are two Names/SSNs on jointly filed estimates, they consistently foul it up when less than all of the estimate is claimed by the primary taxpayer filing MFS.

If your expected withholding for 2008 is as much as your 2007 taxes (110% of 2007 taxes if your 2007 AGI was over $150K) you don't need to pay any estimates, but you'll owe a bunch come next April , so I suggest you put aside 37% of spouse's net profit. This will cover the

12% net SE tax and the additional income tax in the 25% bracket.l

NEXT YEAR, if her business is steadily growing, you should probably pay in quarterly installments 1/4 of the difference between 2008 taxes and your expected 2009 withholding, or better yet, increase your withholding to the prior year's tax level.

Type "estimated taxes" into any search engine to get information on paying Estimated Taxes, or read IRS Publication 505 and/or IRS form

1040ES and 2210.

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