Estimated taxes
January 10, 2014 8:29 AM Subscribe
I just started working for myself in September. before I was on a W2.
There is a deadline on January 15th for paying estimated taxes for self employed individuals. Are those taxes for the earnings I made in the last quarter of 2013 or for what I expect to make in the first quarter of 2014. What's an easy way to figure out how much I owe (or would owe).
I'd like to note I didn't make that much working for myself yet so it's possible I don't even owe anything for Q4 of 2013. but I have no idea.
Yeah, this is when using an accountant really starts to make sense. It will cost money, but the accountant will know how to do it up right, and very likely will save you more money than she/he charges.
posted by Longtime Listener at 8:44 AM on January 10, 2014
posted by Longtime Listener at 8:44 AM on January 10, 2014
There is a worksheet in form 1040-ES that you can use to figure out if you are subject to estimated tax payments. Because this is your first year being self-employed and you were only self-employed for one quarter, you may not have to submit estimated taxes yet. For a quick estimate of your overall tax liability, you can use a calculator like this one that allows you to include both W-2 and self-employment income. This stuff is a whole lot easier to deal with when you have the advice of a qualified accountant, though.
posted by bedhead at 8:49 AM on January 10, 2014
posted by bedhead at 8:49 AM on January 10, 2014
Check you state website where you register to pay your quarterly taxes. My state had a web app to help estimate how much to pay, made it easy to transfer the funds online etc.
posted by COD at 9:00 AM on January 10, 2014
posted by COD at 9:00 AM on January 10, 2014
You can probably get away without paying Q4 estimated taxes by the 15th, but it's also worth talking to an accountant, not least because he/she can also point you to potential startup expenses that can go into your April return.
posted by holgate at 9:07 AM on January 10, 2014
posted by holgate at 9:07 AM on January 10, 2014
Here is a relevant line from this irs website:
This is good in the long term, as you want to earn more SS quarters, but you'll also soon learn that they are about twice the rate of what your Medicare/SS payments were when you were employed. The stimulus payroll tax cut doesn't effect people not on a payroll (self-employed) and the employer paid contribution is about half. This roughly works out to be like 15% of your income. Medicare and SS come before all else and are supposed to be paid at the time of earning, even if you made very little in a given year. This is why the Earned Income Credit (EIC) exists to try and balance this out for low income workers, but you'll never directly get your medicare/SS payments back like a withheld federal/state income tax.
So, my advice is to go ahead and get ready to file before the end of the month. You might as well file and figure out the damages and get things started off right for the new year. And since your old job was withheld assuming that job would last the whole year, but only lasted for 9mo, you're probably getting a check!
Just a disclaimer, I'm not a tax professional, just a formerly self-employed person who royally fucked up her taxes a while back and attempted to wise up.
posted by fontophilic at 10:37 AM on January 10, 2014 [1 favorite]
January payment. If you file your 2013 Form 1040 or Form 1040A by January 31, 2014, and pay the rest of the tax you owe, you do not need to make the payment due on January 15, 2014.But this line from you:
I didn't make that much working for myself yet so it's possible I don't even owe anything for Q4 of 2013Is so, so, sadly wrong. These estimated quarterly payments aren't just for income taxes (which you, in fact, may not owe), they are for Medicare/Social Security withholdings as well, which basically everyone will owe f o r e v e r. (Feel free to picture me saying this like a spooky campfire story with a flashlight under my chin.)
This is good in the long term, as you want to earn more SS quarters, but you'll also soon learn that they are about twice the rate of what your Medicare/SS payments were when you were employed. The stimulus payroll tax cut doesn't effect people not on a payroll (self-employed) and the employer paid contribution is about half. This roughly works out to be like 15% of your income. Medicare and SS come before all else and are supposed to be paid at the time of earning, even if you made very little in a given year. This is why the Earned Income Credit (EIC) exists to try and balance this out for low income workers, but you'll never directly get your medicare/SS payments back like a withheld federal/state income tax.
So, my advice is to go ahead and get ready to file before the end of the month. You might as well file and figure out the damages and get things started off right for the new year. And since your old job was withheld assuming that job would last the whole year, but only lasted for 9mo, you're probably getting a check!
Just a disclaimer, I'm not a tax professional, just a formerly self-employed person who royally fucked up her taxes a while back and attempted to wise up.
posted by fontophilic at 10:37 AM on January 10, 2014 [1 favorite]
A good point to make is: if you are unsure whether this payment is for this quarter or last, you should have an accountant do it for you.
posted by yclipse at 1:26 PM on January 10, 2014
posted by yclipse at 1:26 PM on January 10, 2014
« Older Academic wanderlust: edition Copenhagen | Advice for living with/loving a first year high... Newer »
This thread is closed to new comments.
posted by Shoggoth at 8:42 AM on January 10, 2014