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Old 02-13-2008, 01:26 PM
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1099 Question

I started doing some indepenedent work for an internet company in November 2007. I earned about $1900 for November and December. The company told me that they will not be sending me a 1099 but gave me information through email to be able to do my taxes.

When I tried to use Turbo Tax, it says that I have to do a Schedule C and create a business. I don't have a business, I just have this side job through this internet company who did not provide me with actual tax forms.

So, aparently I have to pay federal tax, state tax (CA) and self-employment tax.

I am a homemaker and do not work outside the home. My husband had about $88,000 in taxable income last year. We file "married filing jointly". We have three children.

I have a couple of questions:

1) Do I have to actually do a Schedule C?
2) Am I better off filing taxes as "married filing jointly" or would we be better off to file separately?
3) Do I have to do quarterly estimated taxes for this side job? I make roughly $1,000 a month.
4) If I have to do quarterly estimated taxes, how do I do that?

Any informaiton and advice for this situation would be greatly appreciated.



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Old 02-14-2008, 12:23 PM
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How does one report 1099-Misc Income and make estimated tax payments?

Do I have to actually do a Schedule C?
Firstly, I think the Company should be sending you a 1099-Misc as it is required by Law. Nevertheless, the income earned is reportable.

You do not have to file a Scheduel C unless you have expenses that need to be deducted against the self- employed income that you earned. I would suggest instead that you report the income on Schedule C-EZ and claim some necessary and ordinary expenses along with any auto mileage expenses in connection with the consulting job.

If you do not have any expenses to report against this self-employment income, I would report this income as Miscellaneous Income subject to S/E tax.

Am I better off filing taxes as "married filing jointly" or would we be better off to file separately?

Yes, in my experience, it would be better to file MFJ, as this income is not very material.

Do I have to do quarterly estimated taxes for this side job? I make roughly $1,000 a month.
The projected income would be $12,000 per year and the Self-employment tax generated assuming no expenses are incurred to offset this income would be around 15.3% x 12,000 = $1,800. Furthermore, lets assume your tax rate is is 15%, this would result in an additional tax liability of another $1,800. The total tax liability therefore, would be approximately $3,600.

I suggest you can either have your spouse withhold an additional $3,600 for the year by increasing the federal tax withholding by approximately $150 per bi-weekly pay or you could pay $900 federal estimated quarterly tax payments.

Your Turbo tax program will allow you to print these estimated tax vouchers and the first voucher is due April 15th 2008. Follow the instructions and the program will allow you to print 4 vouchers along with address label where to mail the payments.

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Old 02-14-2008, 01:22 PM
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Thank you for your response (I had to register under a different name because my email blocked the verification link).

We generally get a pretty good tax refund every year. Does my husband still have to withhold the extra amount from his paycheck or do I still have to make quarterly payments? Or can I just let him continue to deduct what he usually does and just have a smaller refund next year? I would rather not do quarterly payments and just have a smaller tax refund at the end of the year, but don't know if there would be a problem with that.

Thanks.



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Old 02-17-2008, 11:24 AM
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Well, it seems that you receive a big refund, although I am not sure of the amount, but, clearly if the refund is greater than the additional taxes you will incur because of your self-employed income, you can avoid paying the estimated taxes.

Further, if you don't mind owing a bit of taxes at the end of the tax year, then the anticipated refund will reduce the impact of the additional tax liability. Once again, you can avoid paying the estimated taxes.

If your self-employed income increases substantially, then I really suggest that you should start making estimated tax payments to avoid potential large tax liability at tax filing.

But, pay careful attention to avoid penalties and interest on underpayment of taxes. Make sure your spouse increases his withholding accordingly as explained earlier in my previous message.

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