Author Topic: Quarterly Tax Payments for 1099 Contractor  (Read 792 times)

MFG_Hotspur

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Quarterly Tax Payments for 1099 Contractor
« on: December 01, 2016, 03:51:08 PM »
My wife switched jobs from a full time W2 employee to two part time jobs (one W2 and one 1099) at the beginning of September 2016.

I am now trying to figure out how to calculate the estimated quarterly payment. With her switching jobs mid year, us filing jointly, me being a W2 employee, and her still working part time as a W2 employee, I had trouble making sense of the 1040 ES taxes form.

Please let me know if my assumptions are correct below given our numbers:

My taxable income for 2016 (W2): ~$150K

Her taxable income at her previous full time job for 2016 (W2): ~$35K

Her taxable income at her new job for 2016: ~$6K

Her income received from 1099 job in 2016: ~$12K

Given these numbers and what I have read, it seems like I should 15.3% of the $12K for social security and medicare taxes and 28% of the $12K given the tax bracket we are in. This would total 43.3% of $12K which is ~$5000.

I understand the numbers are rough and aren't exact, but is this correct conceptually? Am I missing anything?

Thanks in advance for the help!




MDM

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Re: Quarterly Tax Payments for 1099 Contractor
« Reply #1 on: December 01, 2016, 04:39:36 PM »
The IRS won't care about separate estimated payments for the 1099 income, but they will care about your overall withholding plus estimated payments.

From the numbers you gave, assuming standard deduction, MFJ both under 65 with no other dependents, you would owe ~$38.1K in federal income plus self-employment tax.  If you will have withheld that much* from the W-2 jobs, no estimated payments are needed.

*More generally, if you meet any of the safe harbor tests.  See Who Must Pay Estimated Tax.

MFG_Hotspur

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Re: Quarterly Tax Payments for 1099 Contractor
« Reply #2 on: December 01, 2016, 09:45:43 PM »
Thanks for the quick response!  One quick question to clarify - are you saying I would owe ~$38k in federal income AND self-employment tax or are you saying I would $38K PLUS some additional money due to self-employment tax?

If it's the former, then I think I am all set (I just checked my most recent paystub to see how much I withheld this year) but if its the latter and the IRS treats self employment tax separately then I will make a payment (e.g. even if I am owed a refund of $1000 due to federal income withholdings and I owe $1000 in self employment tax, I should make the $1000 payment and get a refund later since they are treated separately).

MDM

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Re: Quarterly Tax Payments for 1099 Contractor
« Reply #3 on: December 01, 2016, 10:47:48 PM »
Thanks for the quick response!  One quick question to clarify - are you saying I would owe ~$38k in federal income AND self-employment tax....
Yes, this one.  But you should check for yourself.  The table below comes from the case study spreadsheet, showing what assumptions I used.

CategoryMonthly
Comments
Annual
Salary/Wages for earner #1$12,500$150,000
Salary/Wages for earner #2$3,417$41,000
Pretax Health Ins.$400$4,800
FICA base salary/wages$15,517$186,200
Schedule C net profit$1,000$12,000
Federal Total Income$16,517$198,200
Federal tax$3,0372016 rates, MFJ, stand. ded., 2 exempt.$36,448
State/City tax$0Guess, using 0.00% * (AGI - Exempt'n)$0
Soc. Sec.$812Assumes 2 earners paying$9,740
Medicare$225$2,700
Self-employment Tax$141$1,696
Total income taxes$4,215$50,584


Filing Status21=S, 2=MFJ, 3=HOH
# Exemptions2
Adult #1Adult #2
Age2929
# of earners2
Total Income$198,200
Std. Deduct.$12,600
Exemption$8,100
Deductible SE tax$848
AGI$197,352
MAGI$198,200
Taxable$176,652
Net Tax$36,448
VersionV8.12

MFG_Hotspur

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Re: Quarterly Tax Payments for 1099 Contractor
« Reply #4 on: December 02, 2016, 08:48:03 PM »
Thanks for clarifying! I'll use the spreadsheet and go from there.