How much estimated tax do I owe if I make just under $18,000.?

Question

I am a medical transcriptionist independent contractor working from home. Would it be better to file married-jointly or married-single? This is my only source of income other than what my husband makes. I have not made payments yet, will I get charged a late penalty?

Answer 1

One of the few instances where it is better to file separately than jointly is when you are thinking of divorce.

If you split up and you have filed jointly both spouses are just as responsible to pay the tax debt.

I have seen many instances where someone pays all the tax debt for the other spouse after a divorce. IRS doesn't care and will collect from where ever is easiest.

Answer 2

It is usually more favorable to file jointly, but in some cases married filing separately may be better. The only way to find out is to prepare the calculation both ways.

If you file jointly, you can avoid penalties by having enough withheld form your husband's paycheck to make up possible deficiencies. In a joint return, your income will be on Schedule C, and you will have to pay Social Security taxes and medicare, but that will be part of your tax return regardless of how you file.

If you have made no payments yet and will owe tax, a good method is to have your husband file a new W4 this month and specify an extra withholding in December. Taxes withheld by an employer are deemed to have been paid evenly over the year even if they are all withheld in the last month of the year.

You can also prepare a hypothetical income statement now to determine if you will have a penalty. Filing an estimated return in January for the last quarter of the year may be all that you need to avoid a penalty. You can claim that you earned most of the money in the last quarter. With only $18,000 of income, its unlikely you will be challenged.

Answer 3

It's married filing jointly or married filing separately... if you're married, you cannot file as single. You're going to owe self-employment taxes and possible penalties if no estimated payments have not been made. It might be possible that your husband's income and withholding might help you out. Don't forget about home office expenses though. If you do not live in a community property state, have your preparer do your taxes both ways, and see which is better. There's a rule about itemizing if you filing separately though, so jointly is usually better.
The self-employment tax of 18k is $2754.00

Answer 4

You'll almost always come out better for the two of you overall to file a joint return than married filing separately.

Your income tax depends on your total joint income. Figure around $2700, unless your husband's income is over about $60,000 in which case figure more like $4500. If his income is over around $40K but under $60K, will be somewhere in between those two numbers.

In addition to income tax, you'll owe self-employment tax - that's for social security and medicare. It will be around $2500.

Depending on where you live, there might also be state and/or local income taxes.

Technically yes, you'll probably be penalized for not making quarterly payments. You might be able to stay under the radar on that though if you make an estimated payment for the last quarter and pay in most of what you owe - the due date for that is 1/15/08. Send in form 1040ES with your payment.