How do you pay income tax?

The federal income tax is a pay-as-you-go tax.  You must pay the tax as you earn or receive income during the year.  An employee usually has income tax withheld from his or her pay.  If you do not pay your tax through withholding, or do not pay enough tax that way, you might have to pay estimated tax.  You generally have to make estimated tax payments if you expect to owe taxes, including self-employment tax, of $1,000 or more when you file your return.  Use Form 1040-ES to figure and pay the tax.  If you do not have to make estimated tax payments, you may pay any tax due when you file your return.

Penalty for underpayment of tax

If you do not pay enough income tax and self-employment tax by withholding or by making estimated tax payments, you may have to pay a penalty on the amount not paid.  The IRS will figure the penalty for you and send you a bill.

Self-employment tax

The self-employment tax (SE tax) is a social security and Medicare tax for individuals who work for themselves.  It is similar to the social security and Medicare taxes withheld from the pay of wage earners.