I'm an independent contractor, who lives in NJ; the company I contract for is based in CT but my work is done in NJ for the company. I am paid gross income once a month. I know I have to pay quarterly taxes to avoid penalties. How do I calculate my Federal/State/SE (FICA) taxes on each monthly paycheck I receive to then pay my quarterly tax liability? ======>You as a self employer do not pay FICA taxes but you neeed to pay SECA taxes; Self-employment tax is a tax consisting of Social Security and Medicare taxes primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners. For self-employment income earned in 2016, the self-employment tax rate is 15.3%. The rate consists of two parts: 12.4% for social security (old-age, survivors, and disability insurance) and 2.9% for Medicare (hospital insurance).as your work is done in NJ you need to pay estimated taxes to NJ not to CT; for federal estimated taxes, you need a 1099MISC from the payor, so aslongas the amount on your SCh C of 1040 line 29 / 31 is $400 or more than $400 you must file return and also aslongas the as mount on Sch SE of 1040 line 2 / 3 is also $400 or more than $400 then you must pay self employment taxes . I mean say, 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 adjusted gross income and the amount of income tax you owe
however on line 27 on form 1040 you can claim 50% of your SECA taxes that you pay to IRS on your return; Individuals, including sole proprietors, generally have to make estimated tax payments if they expect to owe tax of $1k or more when their return is filed. If you didn?t pay enough tax throughout the year by making estimated tax payments, you may have to pay a penalty for underpayment of estimated tax. Generally, most taxpayers will avoid this penalty if they owe less than $1k in tax after subtracting their withholdings and credits, or if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller. You may have to pay estimated income tax four times throughout the year (quarterly) because you do not have taxes withheld from your pay by an employer. The quarterly tax payment periods are in the chart below:
Payment Period Due Date
January 1 ? March 31 April 15
April 1 ? May 31 June 15
June 1 ? August 31 September 15
September 1 ? December 31 January 15 (of the following year
You don?t have to pay estimated tax for the current year if you had no tax liability for the prior year; You were a U.S. citizen or resident for the whole year;Your prior tax year covered a 12-month period.you need to check NJ dept of revenue for Nj estimated taxes.
Also, my work schedule fluctuates monthly, therefore so does the monthly income.
===============> if your income is received unevenly during the year, you may be able to avoid or lower the penalty by annualizing your income and making unequal payments by using Form 2210 to see if you owe a penalty for underpaying your estimated tax.