Temporary Independent contractor

[PS01]

Hi, 

I entered in a 6Months independent contractor agreement in April 15. I've missed the June 16 self employment tax deadline for erning between APRIL15-JUN15....  Should I file on September 15? or wait until the end of the year and pay the penalties? Also, is it worthy to open a LLC to claim expenses, if this was just a limited time contract? (Contract is for APRIL15-OCT15 Only).

[marctu]

So, the penalty for not making estimated tax payments is the underpayment interest rate, which is currently 8%.  While there is no way to determine if you will not have a penalty, you do want to make the second and third payments on or before September 16, 2024.  This will mitigate any potential penalty that you may incur.   

If this is a temporary contract like you stated, I doubt that forming an LLC will make much of a difference tax wise and a cost/benefit basis.  Ultimately, you would most likely file the LLC and the current unincorporated entity on a Schedule C in your personal tax return. 

Thank you so much for your question @PS01 

Thank you so much for your question  

Be well and safe!

Marc T.

Turbo Tax Expert

27 Years of Experience Helping Clients

[SwapnaM]

To avoid paying penalties, it is highly recommended that you pay the missed quarter payment as soon as possible because  the underpayment tax penalty is worked out by looking:

• How much you owed 
• How long it took before you finally paid

In other words, you’ll pay more the longer you wait.

You do not have to open an LLC to claim expenses. As an independent contractor you are considered as self-Employed & can claim expenses for your work on SCH C.

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

@PS01 Thanks for the question!!