If your an independent contractor, must you pay quaterly taxes?

Question

What happens if you do or don't.

Answer 1

Not necessarily. If you are going to owe a total of under $1000 for the year, or if you (or your spouse, if filing a joint return) has enough withheld from wages to cover what you will owe (within $1000) then you are not required to file quarterly. Otherwise, you are.

If you don't, you will be penalized for underwithholding when you file your return, even if you pay everything you owe with the return.

Answer 2

If you expect to have more than $1,000 in tax liability you are required to make quarterly estimated tax payments to the IRS. With the 15.3% self-employment tax, you'll hit that with about $6,536 in net income from the business activity. At that level you wouldn't even owe any income tax in most cases but the SE tax is levied on any SE income that exceeds $400 in a year.

If you don't make the quarterly payments, there will be penalties and interest for underpayment of estimated taxes when you file.

Answer 3

Actually, to add to the above answers, you won't incur penalties if you have 100% of last year's tax liability withheld. This could be the case if the independent contract work is on the side or otherwise in addition to a wage earned job that you held last year.

Answer 4

Yes, you are supposed to pay quarterly estimated tax. If you don't you will probably end up owing a whole lot of money on April 15 and they can charge you a penalty.