Is there an accountant in the house? [Tax]

Grundlestiltskin

So, quick question on estimated taxes, penalties, what I can expect to pay. Quick breakdown of 2011

- Was an unemployed student from January until July
- Invoiced a company as a contractor from July until October
- Was on the company's payroll from October until December

I didn't pay any estimated taxes on my contracting invoices because I was lazy, stupid, and didn't really understand them. Now I'm looking at my taxes and trying to figure out how to account for that. The estimated tax form says that you only pay if you're expecting tax on income that isn't subject to withholding (so, my income for 3 months or so) to exceed $400. I have no idea how that's impacted by the 6 months I was unemployed.

Basically, what do I do at this point?

bowen

Did you get a 1099 for your contractor work?

Pay the taxes you owe post haste if you made more than $400. Like, today, since it was due quarterly (the quarter you earned the money).

tyrannus

If you expect to owe $1,000 or more at the end of the year, you are required to make payments of estimated taxes. Additionally, if your withholding is less than the lesser of 90% of the current's years tax, or 100% of last year's tax, you will be required to make estimated payments. Failure to do so may result in a penalty, which may be waived if the balance of tax due at filing is under $1,000.

Basically, I say get your return in order through like TurboTax and see how much you'll owe at the end of the year. You're going to get a Schedule C and you'll be paying self-employment taxes, but your time as a student should qualify you for some sexy education credits.

TL;DR - No worries about estimated taxes.

Here's at thing: http://www.irs.gov/pub/irs-pdf/f1040es.pdf

Grundlestiltskin

Should I just pay the estimated taxes and hope I get it back in a refund? I made about as much as a contractor as I have on payroll, and I'd assume I overpaid by a lot on my payrolled period since it was only 3 months out of the year. I'm just wondering if the fact that I paid that much in taxes from October through December if it'd offset the estimated taxes I'd owe on the other 3 months.

tyrannus

If you made $10,000 as someone who is self employed, you'll owe about $1228 in self employment taxes, which his reduced by your payroll withholding taxes paid and any credits you may get. Really, I don't think you should worry about your estimated taxes.

Grundlestiltskin

tyrannus wrote:

If you made $10,000 as someone who is self employed, you'll owe about $1228 in self employment taxes, which his reduced by your payroll withholding taxes paid and any credits you may get. Really, I don't think you should worry about your estimated taxes.

So if my actual withholdings are like 2x what I'd pay in estimated taxes, I'm probably fine?

tyrannus

Grundlestiltskin wrote:

tyrannus wrote:

If you made $10,000 as someone who is self employed, you'll owe about $1228 in self employment taxes, which his reduced by your payroll withholding taxes paid and any credits you may get. Really, I don't think you should worry about your estimated taxes.

So if my actual withholdings are like 2x what I'd pay in estimated taxes, I'm probably fine?

Yup. Any self employment tax is reduced by withholding and any neat credits.