Personal Finance

randylsu · Guest

I changed jobs in late July to a 1099 position that also
pays a good bit more than my previous position. Because
they are net 15, I received only one small paycheck from
them before 9/1. How do I handle my obvious underpayment (I
will still owe about 35% of my total.) in this situation?
Do I just have to make the Jan 15 quarterly estimated
payment? I plan on getting an accountant next yr but wasn't
planning on doing it so soon. Thanks in advance.

Randy

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Arthur Kamlet · Guest

randylsu <randylsu@hotmail.com> wrote:

Steve Pope · Guest

Arthur Kamlet <ArtKamlet@aol.REMOVE.com> wrote:

ed · Guest

Pay an installment in January equal to the least of the
following: 90% of an estimate for your full year 2005 taxes
minus all your early year withholding; or 100% of your 2004
taxes (110% if your AGI was over $150,000 in 204), minus
your early year withholding. You will then have to complete
form 2210 and its Schedule AI with your return next April
(its included with every good tax program) AND check the box
on form 2210 to apply your withholding in the quarter
withheld instead of averaging it over all 4 quarters. This
is necessry to prove to the IRS that the higher income came
late in the year and therefor your installment wasnt due
earlier.

There are many 2005 tax estimaters on the web, and even ones
that will compute exactly how much your last quarter
installment must be using your actual quarterly income
(which is what the AI in your tax program will eventualy do,
but they never have their full 2210 AI functional in time to
make your January 15 payment). Put IRS 2210 tax
calculator into any search engine to find a current one
Or, if you have a tax program from last year, open a new
file and put this year's income figures into it when you
know them all and then use their 2210 AI form. This will
overpay a bit but at least its on the safe side.

If your spouse is still working you can increase his/her
withholding to meet one of the above "safe harbors" which
eliminates the need for the 2210 AI and paying any
installment because all your withholding is automatically
applied equally over the 4 quarters unless you advise
otherwise.

I presume you are aware that you'll owe SE taxes of a bit
over 15% of your SE net income (up to a total of $90,000
of your total earned income and then less than 2% on any
excess) in addition to your regular tax, and you can deduct
1/2 the SE taxes on the front page of your 1040 as well as
deducting SE Health insurance there also (if you otherwise
qualify), and you probaby can deduct some expenses from the
1099 income when completing Schedule C as self employed,
ed

<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
<< ======================================================= >>

randylsu · Guest

Thanks for the reply Ed. Quarterlies don't sound like much
fun, but I guess that's one reason contractors make more ;).
Don't think we can afford to boost my wife's withholding by
enough to cover the underpayment, so I'll be filing a 1/15
payment. I'll probably just take a crack at the number w/
my '04 software & take my chances.

<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
<< ======================================================= >>

Seth Breidbart · Guest

wrote:

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