Do I have to file quarterly estimated taxes as a dentist working as an independent contractor part-time?

Question

I have a full time day job with a regular salary where taxes are taken out. I have recently taken on a part-time position (3 to 5 days a month) as an independent contractor in a dental practice. Do I have to pay quarterly estimated taxes? How do I figure out what amount to pay since my pay is based on production?

It looks like reducing my withholdings on my W-4s won't be enough. When I fill out the 1040ES what do I put in for my earnings in 2006? Do they mean just as a contractor? I've only been in this contract position since March of this year, but was employed (and paid taxes) in 2006.

Answer 1

If you expect to owe $1000 or more in taxes when you file, then yes, you are required to file quarterly. You have to guess what you'll make - that's why they call it "estimated". Since you're filing after each quarter has ended, you should know what you made that quarter. Remember that as an independent contractor you'll be paying self-employment taxes as well as income tax. This can be over 15%, although if your salaried job pays over somewhere around $94,000 a year, it won't be nearly that much since your social security will already have reached the max for the year.

If you expect to owe over $1000, you can have the extra withheld at your salaried job and not make quarterly payments.

Answer 2

Since you have a regular salary with taxes taken out, you can adjust your withholding to cover the taxes you may owe on the independent contractor job by submitting a new W-4 to your employer. Then you will not have to file quarterly estimated taxes.

If you do not want to adjust your withholding, then you should file estimated taxes if your balance due on your tax return is going to be over $1,000.

If you send in estimated tax payments, the amounts of the payments do not have to be equal. One way to do it is to send in 30% of your net income from the part-time job at the end of each quarter.

Answer 3

As Judy accurately stated, you may have to make quarterly estimated payments.

There is another way you could handle it as you have a regular job. File a new W-4 and have your employer withhold enough extra $$$ to cover the tax liability. That will cover you as well and it will be handled automatically by your employer.

Answer 4

Yes - you will have schedule C income and will have to pay social security taxes as well. You pay an estimate - any estimate will do as long as it's in good faith.

You can claim no exemptions from your employer (W-4) if you think the withholdings will cover the tax liability the first year til you have a handle on what your earnings will be.

Answer 5

I believe the rule of thumb is if you think you will owe more than $1000 in self-employment taxes (15.3% = Employer and Employee portion of Social Security Taxes plus federal estimated due)

I would check out http://www.irs.gov and search for Estimated Tax Payments in the Publications.

It is a really helpful site.

Answer 6

it depends upon the amount you are earning. Contact a tax professional - he/she can tell you at what what of estimated tax you are required to file on.