First Year 1099

[NB36]

Here is my situation...

2023: Worked a W2 job for the whole year, my Line 24 was $6,801.

2024: Stopped working at the 2023 W2 job. Received unemployment and had taxes withheld from March to June. Began work as a 1099 Contractor on July 1st, and know I have to make my first quarterly payment by September 15th for the June 1 - August 31 pay period. My 1099 Contractor work will not exceed my standard deduction of 14k income by year's end, likely will come in around 13k.

Question(s): How do I estimate quarterly taxes? Do I even need to pay them if my 1099 income will not exceed my standard deduction of 14k?

A secondary question, for itemized deductions - are these submitted with quarterly estimated payments or only during the annual return?

[VolvoGirl]

Even if your income is less than the Standard Deduction and you don't owe any regular income tax on it you will owe Self Employment tax.  For SE self employment tax - if you have a net profit (after expenses) of $400 or more you will pay 15.3% SE Tax on 92.35% of your net profit in addition to your regular income tax on it. So if you have other income like W2 income your extra business income might put you into a higher tax bracket.  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. 

Don't understand your second question?  Are you asking about business expenses on your 1099 self employment income?  You only send in the estimated payments.  You enter your 1099 income and expenses on schedule C in your personal tax return due in April.  It's all combined on y our tax return.  

Don't confuse itemized deductions on schedule A with your business expenses/deductions on schedule C. They are separate. For Schedule A personal deductions, you get to take your itemized deductions or the standard deduction, whichever is larger. Itemized deductions are things like Medical, Gifts to Charity, State Income Taxes Paid, Mortgage Interest, Property Taxes, Car Registration fees, etc.

You get to take both, your business expenses AND the Standard Deduction (or your personal Itemized Deductions). 

[Terri Lynn]

Hello Nathan, and thanks for your questions!

You asked:"How do I estimate quarterly taxes? Do I even need to pay them if my 1099 income will not exceed my standard deduction of 14k?"

How do I estimate quarterly taxes?

As a general guideline to help you determine the estimated amount for quarterly taxes.

1. Estimate your total income for the year. Consider your income from all sources, including your salary, freelance work, investments, and other earnings.

2. Determine your anticipated deductions and credits. These could include expenses related to self-employment, retirement contributions, and other tax deductions.

3. Calculate your expected tax liability for the year. You can use tax software or a tax professional to help you with this calculation.

4. Divide your expected tax liability by four. This will give you the estimated amount you need to pay each quarter.

Do I even need to pay them if my 1099 income will not exceed my standard deduction of 14k?

Your standard deduction and other factors do figure in to the total amount of taxes you owe. However, as a self employed individual you are subject to self employment taxes which are calculated based on your net profit from your business. and is over and above the income tax one pays.  The self-employment tax  is the self-employed person's version of the FICA taxes paid by employers and employees for Social Security and Medicare taxes, and is calculated based  on 92.35% of your net earnings from self-employment.  This tax can not be eliminated or reduced by your standard deduction.  

For example: If one has a total of $13,000 intotal income from all sources, and a standard deduction of $14,000, this would take your total income subject to income tax to $0.  So no income tax would be due, however you would still have self emplyment tax due of $1989 to pay on that $13,000. 

An easy formula to apply to figure out how much self employment tax you will owe is to take your total net profit,  and multiply by 15.3%.

Are itemized deductions - are these submitted with quarterly estimated payments or only during the annual return?

Itemized deductions are reported only during the annual tax return when you file Form 1040 or 1040-SR. Quarterly estimated tax payments are used to pay a portion of your estimated tax liability for the current year. The estimated payments throughout the year represent prepayments of your annual tax bill to reduce the amount of tax owed when filing the yearly return.

You can choose to adjust your quarterly estimated payments if you plan to itemize your deductions on your tax return. You can adjust your withholding and quarterly estimated payments to reflect those deductions to ensure you're paying the appropriate amount of estimated taxes. However, you won't submit itemized deductions with quarterly estimated payments.

• Self Employment Tax 
• Who is Required to File Quarterly Taxes? 
• Guide to Paying Quarterly Taxes 

Please feel free to reach backout with any additional questions or concerns you might have!

Have an amazing rest of your day!

Terri Lynn, EA

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