Author Topic: IRS Pre-Payment - Is there a minimum for a first payment?  (Read 232 times)

Ocelot

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IRS Pre-Payment - Is there a minimum for a first payment?
« on: January 11, 2018, 11:16:27 AM »
I just started working fulltime as a 1099 contractor in November, and thus I should pay my first estimated tax soon. Because it was a half-month for me, it wasn't a lot of income - over $1000 but not by much. Our taxes are going to be fairly complicated this year, with rental properties, two incomes and non-1099 income included, so quickly figuring out what I owe on that one paycheck isn't so simple.
As I've never had to pay estimated before and annual taxes are very soon, am I still required to make this payment? Alternately is there any downside if I just throw an excessive amount of money in as my first payment to ensure I'm above whatever it will be? TIA

terran

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Re: IRS Pre-Payment - Is there a minimum for a first payment?
« Reply #1 on: January 11, 2018, 11:57:56 AM »
Did you start working 1099 in 2017 or 2018?

Ocelot

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Re: IRS Pre-Payment - Is there a minimum for a first payment?
« Reply #2 on: January 11, 2018, 12:59:33 PM »
2017. Only one invoice from '17 though, for the half-month.

terran

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Re: IRS Pre-Payment - Is there a minimum for a first payment?
« Reply #3 on: January 11, 2018, 01:18:50 PM »
When did you actually receive payment? If you received payment in 2018 that's 2018 income.

It may not matter either way if you and your spouse had taxes withheld during the year. As long as you withheld at least 100% of last years tax liability (110% for higher income), 90% of this years tax liability, or owe less than $1000 (tax liability minus what you paid).

If one of those safe harbors won't apply, then you might still be able to make the final estimated payment (due Jan 15th I think) and not owe a penalty, but you'll have to fill out a form showing your 1099 income was uneven during the year.

For 2018 taxes you should pay estimated taxes each quarter. If you make uneven payments you'll have to fill out that form showing you had uneven income (estimated taxes supposed to be paid when you receive income, unlike withholding which is treated the same no matter when it's made), or as long as you make equal payments each quarter and you meet one of the safe harbors above, then you're all set. I tend to just make sure I meet the 100% of last years tax due safe harbor since that doesn't require any guessing.

Take a look through https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes