Not looking for legal advice here, but wondering if anyone else has encountered this situation. I was employed normally though July of this year with regular income tax and payroll taxes withheld from my paycheck. Now I am a contractor on 1099 and will owe additional taxes on my earnings through the end of the year. Must I file estimated quarterly payments for the rest of the year? I suspect the answer is yes. However, I have already missed the 9/15 payment - can I send it in now without penalty, or even better, can I just send it in by 1/15/09 (the next quarterly payment date)?
As long as you are paid to within 10% by 12/31, the IRS rarely cares as to exactly exactly which your income was earned in. Technically, yes, but in reality it’s not an audit issue.
When you figure your payments, remember SE Tax. Most times, you should WH 40% +, and then there’s State.
While you may or may not have to make estimated tax payments this year, it would be prudent to download the paperwork from the IRS website and crunch the numbers anyway. (It’ll give you practice for next year; [ETA: and of course, you may owe some this year - can’t know 'til you check]).
I can’t swear to this, but my feeling from my own limited experience is that if you give them enough money in December that your tax liability for the year is covered, you shouldn’t have any trouble. (Course, if they audit you and decide that you should have made a payment in September, your wicket may get sticky. I have no idea what their policy is regarding “late” payments.)
So far as “payroll taxes” go, you’ll be figuring Self Employment Tax when you do your Schedule C. (This too will have to be included in Estimated Tax Payments.)
If by payroll taxes you mean you have people working for you and you are withholding taxes from their pay, I hope you already have this set up. The gummints get real annoyed if they don’t get their cut on a quarterly basis.
On preview: what DrDeth said. Don’t forget the State, as I just did.
From WorldWideWeb Tax
Just to clarify, by payroll taxes I mean FICA & medicare that I owe - I don’t employ anyone.
Other important points:
I understand all about self-employment taxes, though I don’t owe any FICA for this year since I earned enough in my job through July to cover that (severance pay bumped me up to the max FICA). I recognize that I will owe the full 2.9% for medicare on all my 1099 earnings.
I will definitely owe more than $1000 for my 1099 earnings for the remainder of the year.
My question is, really, does it matter that I failed to make the 3rd quarter estimated payment that was due on 9/15, since I have been making semi-monthly payments (through payroll deduction) through July? Should I go ahead and make the payment now, late, or just wait until the next payment due date which is 1/15/09?
Like we said, at your level it very very likely does not matter which quarter you paid for, as long as you are 90% paid by 1/31. So, yes, just double up next payment.
Thanks. I wasn’t trying to ignore you or be obtuse - the typo in your first post was confusing me. I appreciate your help.