How do I pay my estimated taxes?

Question

I have a full-time (W2) job and am also an independent contractor (1099) on the side. How can I estimate my taxes for the 1099 work?

When I subtract what is withheld from my W2, should I subtract Social Security tax with held and Medicate tax withheld? Or should I just subtract Federal Income tax withheld?

Answer 1

If you pay 100% (or 110% if your gross income is over a certain limit) of your federal taxes for the previous year, then you will not have any estimated tax penalty if you pay all the due taxes before April 15.
(Note: The "federal taxes" includes social security, medicare and federal income tax.)

Answer 2

The people who are advising you to calculate 110% of last year’s tax to avoid penalties are partly right. That’s the income tax part of it. You have to add 15% for self-employment tax on your 1099 income. And the person who said that this could still leave you owing a lot at tax time gives a good warning, if your income is much higher than last year – if it is, you need to try to figure what your total tax will be, and use that in the calculation instead of the 110% of last year. You'll fill out a form 1040ES and mail it with your payment.

Take the 110% of last year’s tax, add the self-employment tax on the 1099 income, and subtract your federal income tax withholding from your W2 job (NOT social security, medicare or anything else). Then divide by 4 to get your quarterly required payment. The next one is due on Sept 15. If you’ve had the 1099 income all year but haven’t filed the earlier estimated quarterlies, divide by 2 instead of 4 since there are only 2 quarterly payment left, this one and the last on Jan. 15.

Answer 3

When you estimate the taxes for the 1099..

You are responsible for the employee and employer parts of social security and medicare that figure is 15.3%

You are also responsible for federal income tax and that will be whatever tax bracket you are in. (For example if you are in the 25% tax bracket you will want to withhold 25% + 15.3%)

Being a paid on a 1099 allows you to deduct your expenses associated with being an independent contractor (complete schedule C when doing your Federal Income Taxes at the end of the year). This offsets your income, which allows you to pay taxes on the money you received less expenses.

Your taxes are due as you earn them so if you are making more money than last year then you will want to make sure that you estimate the taxes that will be owed and pay quarterly with a 1040ES that way you will not have a huge tax liability at the end of the year.

http://www.irs.gov/pub/irs-pdf/f1040es.pdf

Answer 4

The above answerer is partially correct, this will satisfy the legal requirement, but may leave you hanging at the end of the year if your contracting job is making big bucks.

Take last years total tax from your 1040 multiply by 1.10.

Now subtract what was withheld from your w-2 job. You now have the balance as to what is legally required. Your estimated taxes are due by October 15, so divide the balance by 2 (you will pay the final payment next year in January, just to be safe).

Go to IRS.gov and search on estimated tax payments to get the remittance form.

Make sure you put "2007 - 1040 and your social security #" in the memo line.

Answer 5

don't forget about State taxes, seems like everyone worries more about federal and forgets about that state and at the end of the year they are oh k with federal but state wants there portion also. so don't forget, unless you live somewhere where they don't care if you file a state return. or pay state taxes :)
and what I do about my husbands 1099 is just subtract all job related expenses and then times the bal. at 15% and that is the federal taxes owed,, then the state comes in.

Answer 6

Put in 110% of the amount you paid in Federal tax last year.