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Im working as full time employee on W2, but I also do independent contract work and receive payment on 1099. This amount will be close to $40K for 2007 and do I need to pay esitmated tax for every quarter or can I choose to pay the tax at the year end, before Decemeber 31. Will I get penalized? This year W2 tax which I pay through my current employer will be less than last year.

2007-09-21 12:47:44 · 4 answers · asked by Dev 1 in Business & Finance Taxes United States

Can just pay two bulk payments, one now and one around Decemeber using https://www.eftps.gov/eftps/

2007-09-21 13:00:31 · update #1

4 answers

You should definitely pay estimated taxes and not wait until the end of the year. You will get penalized if you don't and your final tax liability (after accounting for all pre-payments) is greater than $1000 you get penalized. If you don't want to make estimated tax payments, you could always increase the amount of your withholding from the w-2 job you have to the amount that you think that you're going to have to pay.

2007-09-21 12:54:34 · answer #1 · answered by toehead 2 · 1 0

The tax system is a pay as you go system. The government uses the money you pay in every payday in withholding and every quarter in estimated tax to fund the current operations. What would happen to you if your employer only paid you on December 31st? Most people including me wouldn’t be able to make it because of cash flow. The government is no different, that’s why there is an estimated tax penalty. By the way you can use EFTPS if you want to.

Most people are subject to estimated taxes and will have to pay a penalty if they owe more than $1,000 when they file their return. Here are the exceptions; if you pay 90% of this year’s tax or 100% (110% if your income is high enough) of last year’s tax, there is no penalty. When I say pay; I mean tax credits, withholding, and estimated taxes. The IRS doesn't care where the money comes from; you could increase the amount withheld at your job to cover the estimated taxes or pay the estimated taxes monthly. Form 1040-ES stays that if you are required to make estimated tax payments you must make them at least quarterly, but you can make them more often

If you don’t file and pay on time (including estimated tax) you will always pay more than you legally have to thru penalties and interest.

Never put an estimated tax penalty on your return; either by using software or let your preparer put it on your return because, if you do you will pay the penalty. If you let them assess it they might not if it is small enough. IRS won’t say how small so don’t do it.

2007-09-21 21:06:25 · answer #2 · answered by Charlie & Angie G 4 · 0 0

You need to pay quarterly. The idea of estimates is to keep the pay-as-you go structure that a W-2 has. Now, if you pay it all in the 4th quarter, and when you do your tax return later, you have paid it all and are getting a refund, it may not matter. They may not catch it. But if they do, you will be assessed a late pmt penalty. On $40k, that's a lot of income and the taxes are a lot (don't forget, you will have self employment tax on that as well), so you are really at risk if you have not made any quarterly pmts. At this point, I'd make a 3rd qtr pmt. It was due 9/15, but you'll only be a week late if you send it now. Then also make a 4th qtr pmt.

2007-09-21 20:31:41 · answer #3 · answered by LC 2 · 1 0

You are supposed to pay it by quarter. If you have enough paid in by the end of the year, you'd probably slip by and not get penalized, but that's not for sure, you could still end up with penalties.

2007-09-21 23:18:31 · answer #4 · answered by Judy 7 · 1 0

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