1040-ES question

[meleetaylor]

Hi!

My husband started a counseling business in 2021.  He made very little money, as it is just a side job right now; he works full time at another job which he receives a wages and a W-2.  I have submitted 2021 taxes using our usual 1040 and this time filling out the Schedule C.  Fyi he is not an independent contractor; he would never receive a 1099 NEC.  Clients pay him directly and we have ledger software that keeps track of all that.

My issue comes to estimated quarterly taxes.  As I said, he makes little money on that job and therefore would only pay small amount of taxes.  However, the 1040-ES seems to take in to account all his income when estimating tax payments.  We don't have much federal withheld from his wages job because we like to break even at the end of the year (we have 2 kids and get the child tax credit).  So, when I make the calculations on the 1040-ES, it looks like we would have to pay quite a bit every quarter.  I can't tell if I can list the child tax credit on line 7 (the instructions don't make it appear so).  If I can't, then the tax owed is huge. 

My big question is this: Could I just estimate the taxes due on his self employed income myself without the 1040ES and just pay that, or am I going to get fined for not meeting the minimum payment because I didn't account for his wages job (which, of course, never mattered before because I never had to calculate estimated taxes on a job that automatically has withholdings)?  I apologize if I'm going in circles here.  Does this make ANY sense?  Thanks in advance!

[ee-ea]

See this

https://turbotax.intuit.com/tax-tips/small-business-taxes/estimated-taxes-how-to-determine-what-to-p...

[VolvoGirl]

The IRS won't be expecting them and they don't get sent with your return.   You can figure different amounts or ignore them.   You can also increase the withholding on your wages instead. 

To prepare estimates for next year you start with your current return, but be careful not to change anything.  If you can't get back into your return, Click on Add a State to let you back into your retun.

You can just type W4 in the search box at the top of your return , click on Find. Then Click on Jump To and it will take you to the estimated tax payments section. Say no to changing your W-4 and the next screen will start the estimated taxes section.

Or Go to….

Federal Taxes or Personal (Deskop H&B)

Other Tax Situations

Other Tax Forms

Form W-4 and Estimated Taxes - Click the Start or Update button

See,

https://ttlc.intuit.com/community/tax-payments/help/can-turbotax-calculate-next-year-s-federal-estim...

You must make quarterly estimated tax payments for the current tax year if both of the following apply:

- 1. You expect to owe at least $1,000 in tax for the current tax year, after subtracting your withholding and credits.

- 2. You expect your withholding and credits to be less than the smaller of:

    90% of the tax to be shown on your current year’s tax return, or

  100% of the tax shown on your prior year’s tax return. (Your prior year tax return must cover all 12 months).

The 1040ES quarterly estimates are due April 18  June 15, Sept 15 and Jan 17, 2023  Your state will also have their own estimate forms.

Here are the blank Estimates and instructions (the actual 1040ES forms are at the very bottom so scroll way down)

http://www.irs.gov/pub/irs-pdf/f1040es.pdf

You can pay directly on the IRS website https://www.irs.gov/payments

Be sure to pick the right kind of payment and year.....2022 Estimate

[ThomasM125]

You can base your estimated taxes on just the self-employment income, as it seems you have sufficient taxes withheld from the salary job to account for the tax on your other income. The net income from self-employment is subject to a self-employment tax of about 15%, which is in addition to the income tax amount, so you need to factor that in.

[VolvoGirl]

And by the way, he is an independent contractor.  Being Freelance or independent contractor, outside consultant, sub-contractor, sole proprietor, self employed, etc. are all the same thing.  You need to fill out schedule C for self employment business income.  You are considered to have your own business for it.  YOU are the business.

Heres some info........

You will need to keep good records.  You may get a 1099NEC at the end of the year if someone pays you more than $600 but you need to report all your income no matter how small and if you don't get the 1099NEC.

You use your own records.  You are considered self employed and have to fill out a schedule C for business income.   You use your own name, address and ssn or business name and EIN if you have one.   You should say you use the Cash Accounting Method and all income is At Risk.   

After it asks if you received any 1099Misc or 1099NEC it will ask if you had any income not reported on a 1099Misc. You should be keeping your own records.  Just go through the interview and answer the questions.   Then you will enter your expenses.

Self Employment tax (Scheduled SE) is automatically generated if a person has $400 or more of net profit from self-employment.  You pay 15.3% SE tax on 92.35% of your Net Profit greater than $400.  The 15.3% self employed SE Tax is to pay both the employer part and employee part of Social Security and Medicare.  So you get social security credit for it when you retire.  

The SE tax is already included in your tax due or reduced your refund.  It is on the 1040 Schedule 2 line 4 which goes to 1040 line 23.  The SE tax is in addition to your regular income tax on the net profit.

Here is some IRS reading material……

IRS information on Self Employment

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Self-Employed-Individuals-Tax-Center

Pulication 334, Tax Guide for Small Business

http://www.irs.gov/pub/irs-pdf/p334.pdf

Publication 535 Business Expenses

http://www.irs.gov/pub/irs-pdf/p535.pdf