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Old 01-11-2017, 08:50 PM
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Join Date: Jan 2017
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How much SE tax should I be paying by 1/17/17?

My spouse started her own business this year in March 2016 and at the time, we were unsure how much money she would actually generate. By the time December 31 rolled around, she generated over $11,000 (mostly in the 3rd and 4th quarters), however, we did not pay any SE tax (yet).

Her final numbers (rounded and on cash basis, not accrual):

$11,000 gross income (about $3k of this income is 1099 income and most likely be reported to the IRS)
$8,000 net income (possibly could take more business expenses that I did not account for in Quickbooks, ie. fuel to her office, depreciation of car, etc)
$400 in net assets, furniture etc

I work full time (not self employed) and I pay payroll tax and we file married jointly. We did not make any quarterly payments for her.

I've done some research but I cannot pinpoint if she needs to make *any* SE tax payments before 1/17/17. However, I am assuming she needs to but I just do not know how much or what is recommended.

Any and all help would be appreciated.

Let me know if I am missing any important pieces of information.

Thanks!



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Old 01-12-2017, 12:50 AM
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My spouse started her own business this year in March 2016 and at the time, we were unsure how much money she would actually generate. By the time December 31 rolled around, she generated over $11,000 (mostly in the 3rd and 4th quarters), however, we did not pay any SE tax (yet).

Her final numbers (rounded and on cash basis, not accrual):

$11,000 gross income (about $3k of this income is 1099 income and most likely be reported to the IRS)
$8,000 net income (possibly could take more business expenses that I did not account for in Quickbooks, ie. fuel to her office, depreciation of car, etc)
$400 in net assets, furniture etc====.You shouldn?t report $400 of net assets, furniture or etc on Sch C however, you need to depreciate the biz related assets on Sch C on line 13; Depreciation starts when you first use the assets in your business or for the production of income. You can depreciate your biz related asets more at an accelerated rate by using either(both) sec 179 or (and)bonus depr

I work full time (not self employed) and I pay payroll tax and we file married jointly. We did not make any quarterly payments for her.==>correct since you are a full time employee, your employer withholds income taxes from each paycheck. Usually, that's enough to take care of your income tax obligations.plz read far below on quarterly estimated payments

I've done some research but I cannot pinpoint if she needs to make *any* SE tax payments before 1/17/17. However, I am assuming she needs to but I just do not know how much or what is recommended.========>>No she needs to pay self employment tax when she files from 1040. Plz read below on SECA tax payment

NOTE: just for reference, as a biz owner filing form Sch C of 1040, aslongas the amount on Sch c line 29 / 31 is $400 or exceeds $400 then youmust file your return as a biz owner self employer I mean and also aslongas the amount on Sch SE of 1040 line 2 / 3 is also $400 or exceeds $400, then you must pay self employment taxes AKA SECA taxes and can claim 50% of yoru SECA taxes paid to the IRS on your 1040 line 27 on page 1.ALSO, in most cases, you must make estimated tax payments if you expect to owe $1K or more in taxes for the year over and above the amount withheld from your wages. If your prior year Adjusted Gross Income was $150k or less, then you can avoid a penalty if you pay either 90 % of this year's income tax liability or 100% of your income tax liability from last year (dividing what you paid last year into four quarterly payments). You may use the 2015 tax liailbity as a baseline to help figure out 2016 estimates.You don't have to make any payment until you have income on which estimated taxes are due; your spouse receives income during the third&fourth quarters that, for the first time, makes you liable for estimated tax payments Your first payment would be due on the third installment date Sep 15 and you are expected to pay 75% of the tax that is due. OR since you receive unexpected income after Sep 1, you pay the total estimated tax on Jan 15 of the following year. But You are not required to make the final tax payment if you plan to file your return by January 31, 2017 and pay the entire balance due.Your Jan 2017 estimated tax payment for Federal income taxes is includable in your Federal estimated taxes paid toward your 2016 tax liability

In reality many small biz owners never pay any quarterly estimated taxes to IRS as interest/penalties are low enough perhaps leas than $ 200~$300 or $400 as their taxable income is relatively low i.e, less then $20K or etc.



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Old 01-12-2017, 09:10 PM
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So, if I wanted to pay an estimated income tax payment? How much should I pay?

and if I wanted to pay an estimated SECA tax payment? How much should I pay?



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Old 01-13-2017, 02:04 AM
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Quote:
Originally Posted by Ramzavail View Post



#1:So, if I wanted to pay an estimated income tax payment? How much should I pay?

#2and if I wanted to pay an estimated SECA tax payment? How much should I pay?
#1; it depends; you may not have to make estimated tax payments aslongas SAY you/ your spouse have enough tax withheld from her/your W2 job to cover taxes on all her/your W2 income, including your self-employment income. You/ your spouse can even increase the amount you/your spouse have withheld from your paycheck so it covers income from both sources. Then you need to make sure you have enough total tax withheld and paid in estimated taxes to avoid a large tax bill when you file.I can not tell you how much you must pay; Don?t put too much importance on how accurate your tax estimate is for now.you need to calculate if u owe $1k or more for 2016 after subtracting income tax w/h and refundable credit(s) on your 1040,if yes, then, by Jan 15th 2017, There are "safe harbor payments" ?a payment that ensures you will not be penalized.As you are married, filing jointly and your AGI is below $150K, you may make a payment equal to 100% of what you paid in income taxes the previous year or 90% of the tax you estimate for the current yearof 2016.however if your AGI is $150K or more you must make a payment equal to 110% of the previous year?s taxes or 90% of the tax for the current year of 2016.
In either case, you will still owe taxes at the end of the year, but you will not face penalties and interest.
The federal tax system is a pay-as-you-go tax system, meaning that as you earn the money, you must pay taxes on it rather than waiting until the end of the year and making a one-time, lump sum payment.




#2;it depends; PLZ read carefully what I wrote; It should be noted that anytime self-employment tax is mentioned, it only refers to Social Security and Medicare taxes and does not include any other estimated taxes that self-employed individuals may be required to file. you usually pay your SECA tax that is essentially the same as the FICA tax that is paid by employers and employees for Social Security and Medicare. (there is no estimated SECA taxes, but you pay your self employment tax when you file form 1040) when you file your return ; You need to calculate your self-employment tax on Sch SE and report that amount in the Other Taxes section of Form 1040. When figuring self-employment tax you owe, you reduce your self-employment income by half of the SE tax before applying the rate. You also claim 50% of what you pay in self-employment tax as an adjustment to income, which is allowed on the front of your Form 1040. For example, Say you run a mall business as a sole proprietor. In 2016 your net profit as reported on Sch C is $75K. Your net earnings subject to the SE tax is calculated on Form SE and would be $69,262.50 ($75K x 0.9235). Your self-employment tax would be $10,597.16 ($69,262.50 x 0.153) and you would report that amount on Form 1040 in the Other Taxes section.You would also report one-half of your self-employment tax, $5,298.58, ($10,597.16 X .50) on Form 1040 as an adjustment to income, which reduces your AGI and the amount of income tax you owe.You do not pay quarterly estimated SECA taxes.

The rule is that you must pay your taxes as you go.Taxes must be paid as you earn or receive income during the year, either through withholding or estimated tax payments. If the amount of income tax withheld from your self-employment income is not enough , you may have to make estimated tax payments. If you are in business for yourself, you generally need to make estimated tax payments. If you expect to owe MORE than $1K in taxes for the tax year after subtracting your federal income tax withholding from the total amount of tax you expect to owe this year, then, you need to pay estimated taxes.



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