1099 and Estimated Tax question?

Question

Worked under 1099. The first pay check was manual check from the company I worked for, and the rest from the company's payroll company. I'm trying to computer my 2006 estimated tax to send it out before 1/16/07 deadline.
My problem is on the final paycheck stub, the payroll company did NOT include the amount I was paid for by the manual check, and I was told by the company I worked for that I can just use the number on my final paycheck stub to figure out my Estimated Tax.
This number does not include the 1st pay, manual check.

I think the payroll company probably has reported IRS whatever the number was on my final paycheck stub which doesn't include the amount on the manual check.

What do I do? Do I use the number on the final paycheck stub OR
add the amount of manual check to the number to figure out my 2006 estimated tax?

To clarify, 1st check was a manual check, and from 2nd check it was direct deposit processed by the payroll company.

My 1st paycheckstub (my 2nd pay) shows the amount starting from my 2nd pay, and never included amount I was paid for my 1st pay.

Answer 1

You are required by law to report all income not only that which shows up on a 1099. Therefore, you should pay estimated taxes on all of the income less any expenses you are able to deduct for business purposes in creating the income.

I assume by the fact that you are only paying estimated taxes for 2006 in January 2007 that you earned all of the money in the last quarter of 2006 since estimated taxes are due quarterly.

Answer 2

Wenkogo, take a deep breath.....

First off, you should compute the tax based on what you earned. The IRS expects that some returns will show more income than is on 1099. That is because you could, for instance, take a one-off job that pays less than $600. you still have to declare the extra income but you will not get a 1099 for it.

Next, contact your company and ask them to have the payroll people include the manual check in the 1099 figure. Strictly speaking, that is the law. If they don't do it, it is no big deal, as long as you include the manual check on your tax return.

Now, turning to your estimates, how much was your 2005 tax liability? If you have already paid at least as much in 2006 (and your income is under $150,000), stop. You have paid in sufficiently.

On the other hand, if you are just getting round to making a whole year's tax payments now, get yourself to a CPA with details of all your income and expenses. Your last checkstub will be enough to start a return with. Find time to sit down and talk to a CPA, face to face. It can save you a lot of trouble and money. I do not wish to be cruel, but if you have to ask this question, you are not yet ready to do your taxes without some professional guidance. A CPA (or Enrolled Agent) need not cost much, especially if all you have is your work and maybe a mortgage. By the way, this is something that you do not want to take to H & R Block. They are good at what they do but, as a rule, this is not one of them.

Answer 3

If you mean you have been employed as an independent contractor and you will have your income reported on a 1099, then a rough guess would be a minimum of 25% of your income. You will owe self employment tax of approximately 15% in addition to any income tax you owe. The amount of tax will be determined by your income. You will be able to deduct your expenses for staying out of state. You can either keep records and use the actual costs, or the IRS allows a daily rate (called Per Diem) that you can claim without record keeping. I suggest you contact a certified public accountant to help answer your questions. Anytime a person is self employed the tax consequences can be complex enough that professional guidance is a good idea. You are wise to file estimated taxes as paying them in a timely fashion may save you some interest and penalty costs when you file your taxes.

Answer 4

You are better off guessing how much the tax will be given the whole amount (including the manual check). I'm pretty sure there is no penalty for over paying (you'll get it back later), but if you under pay, even a little, they can be real jerks about it and it can cost you a lot.

Answer 5

what is with the 1/16/07 deadline? The IRS will not allow ANY filings until Mid Feburary because of the last minute Conrgressional tax codes they voted on in december.

Also you need the employer id number found on your w-2

to clarify that part they will combine them at the end of the year.

Answer 6

You need to wait until you get your 1099 and see what that says. If it does NOT include that first payment, then you still owe taxes on that also, but reporting will be more involved.

Answer 7

add the manual check amount to the direct deposit amount to figure your taxes.

Answer 8

use the # on your final pay stub ,that's what the office send to the I.R.S.,your #'s have to match ,or you going to be investigated ,don't open that door.