[Bill H]

I've been self employed since Jan. of this year and finally figured out how much and where to send estimated tax payments.

First question is :how does the social security and med. get paid, is it taken out of the payments I send to the Feds. or do I have to make a separate payment?

Second: When it comes to tax time how do I know how much I paid into social security so I can deduct half of it?

[steve]

you will be able to determine what you have paid and how to deduct half by using the tax form,,,it provides the formula. if you intend to remain self employed you need to start making estimated payment or you will incur fines.

[T A 70]

Bill are you using a computer to manage the business finances (Quickbooks, Paychex, etc.)?

[Bill H]

Originally Posted by T A 70

Bill are you using a computer to manage the business finances (Quickbooks, Paychex, etc.)?

I haven't been using anything, I just went to the the tax folks yesterday and found out I should of paid on 4/15/10 and 6/15/10. Up until now I haven't made that much $$ as it was only part time stuff, think I've received $19,000 so far working only one day a week. Now they want me to do more work at the pay rate of $20,520 a month for the next 5 months with other continuous work until at least Jan @ 95.00 per hour.
I'm going to end up in jail if I don't get this together soon

[steve]

naw. wont send you to jail. then you couldnt work to pay more taxes and fines. just keep up with the estimated payments and they will leave you alone. after the first year you will be on the radar and they will send you payment stubs....

[65gto69]

Originally Posted by steve

naw. wont send you to jail. then you couldnt work to pay more taxes and fines. just keep up with the estimated payments and they will leave you alone. after the first year you will be on the radar and they will send you payment stubs....

What if your income is so erratic and small that you don't even know how to estimate it?

Mark

[Brian Baker]

We had to pay this tax for a 1099 my wife got from the state of MD when she worked for the Dept. of Aging. She was treated as a "contractor". We never filed quarterly, we always filed annually and it was way too confusing for me to waste an entire weekend trying to figure out, so I pay a tax preparer to do it.

[steve]

Originally Posted by 65gto69

What if your income is so erratic and small that you don't even know how to estimate it?

Mark

you have to pay the same amount or more than you did the previous year to avoid fines. i agree this sucks when your yearly earnings can vary greatly. i have had to pay the fines before. sometimes it is more economically feasible to pay less because you know the quarter will be slow and incur the fine. i dont think ive ever had to pay more than 250.00 in fines.

so for example if in 2008 you paid 20,000.00 in taxes you are expected to send 5,000.00 a quarter in 2009. if you send less and end up making the same wages you will be fined. if you send the same amount as the previous year and make MORE in wages you will not incur a fine but still owe in april. if you make less than the previous year you will receive a refund in april. the way the gov. looks at it its their money the second you make it and its already late. kinds sucks but better money than being staff !!!!

[quicksilver97ta]

Originally Posted by 65gto69

What if your income is so erratic and small that you don't even know how to estimate it?

Mark

I never estimated, I just paid quarterly. That was the deal a few years ago, basically instead of doing taxes annually you do them quarterly. I doubt thats changed. Estimated was for paying in advance which is at will, and was never mine.

[steve]

Originally Posted by quicksilver97ta

Estimated was for paying in advance which is at will, and was never mine.

not true

[steve]

http://www.irs.gov/businesses/small/...110413,00.html

[quicksilver97ta]

Originally Posted by steve

http://www.irs.gov/businesses/small/...110413,00.html

"When To Pay Estimated Taxes

For estimated tax purposes, the year is divided into four payment periods."

Ahh, so that's really what I did. Been a few years. Still the same advise though, do your taxes quarterly and pay, or else, lol.

[steve]

actually you MUST make estimated payments to be in compliance. it may take them several years to catch up to you. but they will.

if you make less than 1000.00 with any single employer you do not need a 1099 from them.

you may also want to look into the fact that if you do most of your work with a single company and work "X" amount of hours there (cant remember the amount) in the governments eyes you ARE NOT considered self employed. the company you work for is responsible for your taxes (and i think they are also supposed to extend benefits to you). you could technicaly not pay taxes under this circumstance and the gov. has to go after the employer not you......



Who Must Pay Estimated Tax

If you had a tax liability for 2008, you may have to pay estimated tax for 2009.

General Rule
You must pay estimated tax for 2009 if both of the following apply.

1.
You expect to owe at least $1,000 in tax for 2009 after subtracting your withholding and credits.
2.
You expect your withholding and credits to be less than the smaller of;
*
90% of the tax to be shown on your 2009 tax return, or
*
100% of the tax shown on your 2008 tax return. Your 2008 tax return must cover all 12 months.




Estimated tax not required
You do not have to pay estimated tax for 2009 if you meet all three of the following conditions.

*
You have no tax liability for 2008
*
You were a US citizen or resident for the whole year
*
Your 2008 tax year covered a 12 month period

[Txbobcat]

I have had rentals for 25 yera or more. Up until 1995 I worked also. After I quit once a year they would send me a letter to pay quarterly but I just blew them off as income had erratic swings in the early years. To this day I have never paid a qurterly tax just send it in at the end of the year.

[steve]

Originally Posted by Txbobcat

I have had rentals for 25 yera or more. Up until 1995 I worked also. After I quit once a year they would send me a letter to pay quarterly but I just blew them off as income had erratic swings in the early years. To this day I have never paid a qurterly tax just send it in at the end of the year.

good luck with that. i wouldnt recommend it, but everyone has a different tolerance for risk. i pay my taxes like im supposed to. i dont need that kinda trouble. ive been freelance for almost 20years its just easier to go with the flow on this one IMO.

[David Holmberg]

IF you expect to owe taxes they will require you to pay quarterly. If (after deductions, mortgage, children, etc) you break even you can file at the end of the year.

[tdavidl]

been following this thread & biting my tongue. lets understand, the estimated tax "requirement" is ONLY a requirement if you want to avoid the underpayemnt penalty which is like paying interest on the amount you SHOULD have paid.

therefore, the IRS will do NOTHING to you if you don't make the estimated tax payments and you pay the appropriate tax & penalty (like interest) when you file.

the penalty is NOT deductible so why incur it ? you may as well make your best guess of how much you think you'll owe & pay it quarterly & save yourself some money.

(yes, i'm a CPA)

[steve]

Originally Posted by David Holmberg

IF you expect to owe taxes they will require you to pay quarterly. If (after deductions, mortgage, children, etc) you break even you can file at the end of the year.

id love to know how to break even.

[steve]

Originally Posted by tdavidl

been following this thread & biting my tongue. lets understand, the estimated tax "requirement" is ONLY a requirement if you want to avoid the underpayemnt penalty which is like paying interest on the amount you SHOULD have paid.

therefore, the IRS will do NOTHING to you if you don't make the estimated tax payments and you pay the appropriate tax & penalty (like interest) when you file.

the penalty is NOT deductible so why incur it ? you may as well make your best guess of how much you think you'll owe & pay it quarterly & save yourself some money.

(yes, i'm a CPA)

exactly. i went back an re-read my posts. i didnt mean to imply you will be carted off to jail if you dont do it. its just that is the way they want it to operate and i see no real good reason no to go along. i owe the money anyway and i see no benefit to attracting the attention of the irs.

[Jack Gifford]

What tdavidl said. [I've been self-employed since 1986]
At tax filing time, form 2210 will resolve interest due on any underpayment of estimated taxes. If your self-employment income varied widely during the tax year (especially if it was higher later in the year), be sure to look at Annualized-Installment treatment (page 4 of 2210) to see if your underpayment interest will be reduced by annualizing the income. [Now, if only someone would pay me for all my time spent DOING these filings each April 15th!]