| “My question is how do I find out the equivalent 1099 pretax dollars I need to earn to equal my net earnings via my older W-2 based job.”------>I am not quite sure what your question is however,As yo can see, as long as the amoun t on Sch C of 1040 line 29/31(and Sch SE line 4) is $400 or exceeds $400, then, you need to pay self employment tax UNLESS the income on 1099 is hobby income reported on form 1040 line 21. So, assume that if the amount on Sch C line 29/31 is $10,000, then this your pretax self employment income.For example, assume that the amount on Sch C lines 29/31 and Sch SE lines 2/3 is $10,000, then, the amount on line 4’d be $9,235($10K*92.35%) and you need to multiply line 4 by 13.3%, its amount is $1228 reported on line 5.And you also need to multiply $1,228 by 57.51% and report the amount, $706, on line 6 on Sch SE on form 1040 line 27. So, your actual self employment tax amount is $522;$1228-$706. This means that your average self employment tax rate is 7.66%;$706/9235. Your net earnings via on your W2 is total gross earnings after FICA taxes, federal(state) taxes withdrawals determined by the number of withholding allowances on your W4(state tax w/d form). The withholding is based on your wages during that pay period and number of dependents.
“Also, if I file next year having worked two jobs - 1 W-2 based and 1 1099 based how bad of a headache does this all cause. Keeping in mind my wife has her job that issues her a W-2.”----->As mentioned previously, as you are an employee, your ER probably withholds income tax from your paychecks. Tax may also be withheld from certain other income including pensions, bonuses, commissions or etc. In each case, the amount withheld is paid to the IRS in your name.Sicne you do not pay your tax through withholding on your income on 1099, or do not pay enough tax that way, you might have to pay estimated tax. People who are in business for themselves generally will have to pay their tax this way. You may have to pay estimated tax if you receive income such as dividends, interest, capital gains, rent, and royalties. Estimated tax is used to pay not only income tax, but self-employment tax and alternative minimum tax as well; as long as you are filing as 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. Estimated tax payments are required on income not subject to withholding, such as earnings from self-employment, unemployment, interest and dividends. You need to pay in at least enough tax through a combination of withholding and estimated payments to avoid the estimated tax penalty. To avoid the penalty, you will need to pay in "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," according to the IRS. The penalty is basically the IRS's way of charging you interest for not paying your taxes throughout the year. The current interest rate for underpayments by individuals is 4%. (The IRS sets this rate each quarter.) Estimated tax payments are due quarterly on the following days: April 15th, June 15th, September 15th, and January 15th. You also need to make quarterly estimated taxes to your state too.
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