Originally Posted by Iphelps00
#1;I recently became an independent contractor. The person I work for however pays me an additional 6% of my gross to cover his employer matching of my SS and Medicare requirements as if I were actually an employee.
#2;The only out-of-pocket expenses that I will have will be my mileage back and forth to my workplace.
#3;I will only make approx $16,000 for the year with this position. I have been able to determine how much to save as if I were a standard employee plus his 6% but I'm not sure if it will be enough. How can I be sure that I save enough to pay all of what I am required to pay at the end of the year? And, can I wait until the end of the year to pay my taxes or will I need to make quarterly payments? Yes, I have read and researched until I'm blue in the face but I just can't find and understand the specifics. Thank you in advance for your help.
#1;Since you are a 1099 EE, actually the ER didn’thave to pay you addtl 6% of your gross to cover ER matching of your FICA taxes. You , as a 1099 EEE, need to pay SECA tax aslongas the amount on Sch SE line 2 , 3 is $400 or exceeds $400, So I can regard the addtl 6% of your gross income as an extra income for you.
#2;you can deduct your biz related exp on Sch C as part of biz operating exp.
#3;I am not quitesur whay your question is. However, as a 1099 EE, you must file return aslongas the amount reported on Sch C line 20/ 31 is $400 or exceeds $400and also need topay SECA tax aslongas the amount on SCh SE line 2 , 3 is also $400 or exceeds $400.however, you can deduct 50% of your SECA tax that you pay to the IRS can be deductible on 1040 line 27.so you need to pay 15.3% of seca tax on the additional 6% of your gross income and deduct 50% of the expenses on your eturn. The SECA tax is the Social Security and Medicare tax paid by self-employed individuals who file Sch C with their IRS Form 1040. SECA is also called the self-employment tax.
And, can I wait until the end of the year to pay my taxes or will I need to make quarterly payments? ========== it depends;
If 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 $1k 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 .if not, you need to pay quarterly estimated taxes;
Note; If you did not pay enough tax throughout the year, by making estimated tax payments, you may have to pay a penalty for underpayment of estimated tax. Generally, you will avoid this penalty if tyou owe less than $1k in tax after subtracting your withholdings and credits, or if you 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.