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Old 04-07-2011, 12:52 AM
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Question independent contractor and employee @ the same time

Howdy y'all.

I'm a full-time employee making around $55k a year. My employer takes out all my taxes.
I'm going to start a second, part-time job soon with another company as an independent contractor. (Making $21K a year)
I read somewhere online that I could just increase the withholding at my full-time job so that I wouldn't have to pay taxes quarterly.
It didn't give any other information... for instance, how much more should I have withheld per paycheck?
Has anyone else heard of this and know that it can be done?
Any help is much appreciated!



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Old 04-07-2011, 05:53 AM
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“I read somewhere online that I could just increase the withholding at my full-time job so that I wouldn't have to pay taxes quarterly.”-->As an IC, you need to pay self employment tax as long as your income on 1040 Sch SE line 4 is $400 or exceeds $400. You must pay BOTH sides of the Social Security and Medicare taxes as a self-employed individual on the money documented by the Form 1099-MISC. You will report the money using Schedule C, which may let you deduct some employee-related expenses that you otherwise have to itemize to claim. The SE tax rate is 15.3% on the NET income (your 1099 figure MINUS whatever deductions you come up with). Also, as long as you are filing as an IC, a sole proprietor, and/or a self-employed individual, you generally have to make estimated tax payments if you expect to owe tax of $1,000 or more when you file your return. However, you do not 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.
Please visit the IRS Websites here; Estimated Taxes
Self-Employment Tax (Social Security and Medicare Taxes)



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Old 04-08-2011, 06:52 PM
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Quote:
Originally Posted by Wnhough View Post
“I read somewhere online that I could just increase the withholding at my full-time job so that I wouldn't have to pay taxes quarterly.”-->As an IC, you need to pay self employment tax as long as your income on 1040 Sch SE line 4 is $400 or exceeds $400. You must pay BOTH sides of the Social Security and Medicare taxes as a self-employed individual on the money documented by the Form 1099-MISC. You will report the money using Schedule C, which may let you deduct some employee-related expenses that you otherwise have to itemize to claim. The SE tax rate is 15.3% on the NET income (your 1099 figure MINUS whatever deductions you come up with). Also, as long as you are filing as an IC, a sole proprietor, and/or a self-employed individual, you generally have to make estimated tax payments if you expect to owe tax of $1,000 or more when you file your return. However, you do not 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.
Please visit the IRS Websites here; Estimated Taxes
Self-Employment Tax (Social Security and Medicare Taxes)
I found the document that I was originally referring to: 2011 Form 1040ES-
"Increase Your Withholding
If you also receive salaries and wages, you may be able to avoid having to make estimated tax payments on your other income by asking your employer to take more tax out of your earnings. To do this, file a new Form W-4,
Employee’s Withholding Allowance Certificate, with your employer."
I understand that because I didn't have to file for estimated taxes last year, that I won't have to this year. But for next year, does the above information from form 1040ES not apply to me?



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Old 04-08-2011, 06:58 PM
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Thanks for that info!
I understand that because I wan't required to file for Estimated Income last year, that I don't need to do it this year. But for next year....
"Form 1040-ES
Increase Your Withholding
If you also receive salaries and wages, you may be able to avoid having to make estimated tax payments on your other income by asking your employer to take more tax out of your earnings. To do this, file a new Form W-4, Employee’s Withholding Allowance Certificate, with your employer."
Does this not apply to me?



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Old 04-08-2011, 10:04 PM
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“ To do this, file a new Form W-4, Employee’s Withholding Allowance Certificate, with your employer. "Does this not apply to me?”---->You can change the number of withholding allowances on your W4 as an employee as many times as you want, but you are a part time IC that needs to file FORM W9, not Form W4. So, as a part time IC, a self-employed individual,as said previously, you would report your income and expenses using either Sch C or Sch C-EZ. In addition you may be required to file Schedule SE, Form 1040, Self-Employment Tax and you may also need to pay quarterly estimated taxes. For instance, you, also as an employee, receive wages, and your wages received can reduce the amount of self employment income that is taxed for OASDI as long as your wages + self-employment income > $106,800 for 2010. For example, assume that you receive wages amounting $83,300 and your net earnings from self employment amount to $24,600. Then you must count $23,500 of your earnings in determining taxable self-employment income for OASDI taxes. I mean $106,800( FICA Tax base)-Wages received $83,300=$23,500( Your taxable self-employment income).



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