New business- taxes when profit in 2nd Quarter?

Question

Hello! My business as a sole-proprietor in services was opened 2/2007. It was a loss for that year. From January 1st- March 31st, I had a profit of $200. From April 1st- May 31st, I had a profit of $700.

If I go by my estimated taxes as defined by 2007, it looks like I actually don't have to pay estimated taxes this year. However, I already know that I will be doubling my profit in the next Quarter as well. I don't want to get in trouble for not paying what I should be paying. Do I need to fill out a Form 2210? I thought I was supposed to use the Annualized Income Installment Method, but it doesn't look right.

I am also assuming that I should be paying my SE tax at this point. Or does this also go by 2007's "profit" (or in my case, lack thereof)?

I have prepared my taxes myself as an Individual for many years. While in the future, I am considering which professionals to use for my needs, right now, I just want to double-check myself. I have read conflicting advice.

Thank you!

Answer 1

The 2210 is filed with your tax return to determine if you can get out of paying penalties because your income was received later in the year, rather than earlier.  If a form 2210 is not filed, then the IRS assumes you made your money equally during the year and would expect an estimated payment in April.

You may not be required to pay estimates for 2008 - but if you end up owing more than $1,000, you should make estimated payments in 2008.  It all depends on if you want to make smaller monthly or quarterly payments, or pay it all at the end of the year.

And yes, you have to account for both the income tax and the SE tax when you make your estimated payments.