Yes I read this BUT the form says to base this information on earnings in 2007, which I donít have, so I donít understand how I am supposed to set this up.
You are not required to make quarterly estimated payments, but you will still owe the same tax burden at the end of the year. Your contract employer will report your income to the IRS on form 1099, and you'll have to pay self-employment taxes as well as income taxes on 1099 income. Since the IRS has no basis year to compute your expected obligation, you can choose between smoothing it out quarterly or giving it to them all in one big lump next April. Assuming that you're disciplined about such things, your smartest strategy would be to compute your quarterly obligations, then pay that money into an interest-bearing account that you will drain next April. If you are less disciplined, you probably ought to make the quarterly payments to avoid having one obscenely huge bill next year (and yes, don't forget to check your state's rules, too).
The Bride of Ironrod earns 1099 income in very irregular chunks. Every time she gets a freelance check, I take out 25% for the feds and 5% for the state. Four times a year, I send in whatever I've withheld during the previous quarter. This method works out pretty accurately for us. Depending on your overall deductions, your effective percentage rate might be higher or lower than that.
Welcome to the joys of the 1040 long form and Schedules A, C and SE. Besides 1099 income, we also have wage income and corporate profits to account for. Tax season is a major ordeal when you aren't a wage slave.