First time as a 1099 - started in middle of the year

[rwayman]

Hi there,

This is my first time working as an independent contractor. I started at the beginning of July and am likely to have this contract at my current rate of pay through the end of 2024.

My question is whether I will be penalized for not having made four quarterly payments during the year (obviously I could not have known in January that this would be my situation come July). Connected to this, do I just estimate my total 1099 income for 2024 and divide by 2, and just make the two payments on time?

Final question connected to this -- do I have to provide any proof of the timeframe of my 1099 engagement, which would explain to the IRS why I did not pay the first two quarterly filings?

Many thanks for any thoughts you can provide.

[Loretta P]

Hello rwayman,

You are correct, you will need to make estimated tax payments to cover 7-1-2024 through 12-31-2024.  You indicated you started at the beginning of July and had w-2 earnings prior to July.  

If you did have a w-2 job in the beginning of the year, you will need to calculate what your estimated tax will be for 2024 and the subtract what has been submitted so far as withholding from your w-2 job.  The balance left after subtracting withholding would be the amount you want to submit as estimated tax payments.  You would then submit your 3rd and 4th quarter estimated payments to cover this amount.  

If you did not have a w-2 job in the beginning of the year, you will still need to calculate what your estimated tax will be for 2024.  This will be the amount you want to submit as estimated tax payments.  You would then submit your 3rd and 4th quarter estimated payments to cover this amount.  When you file your Form 1040 you will also be filing a Schedule C for self employment.  You will have to indicate the date you started your self employment on the Schedule C so the IRS will know that you were not an independent contrator the entire year.

You can submit your estimated payments online at the IRS website or you can print the estimated voucher and mail it to the IRS with a check or money order.

 TurboTax's Tax Caster tax calculator is a good tool to help you estimate your 2024 tax bill or if you may get a refund. 

 Here are some helpful links with additional information on how and when to make estimated payments.

Estimated Taxes: How to Determine What to Pay and When 

When to pay estimated tax