Due to your wife's shift in employment to a contractor role, it's important to start accounting for her self-employment income now to avoid underpayment penalties. You have the option to manage her estimated taxes either by making direct quarterly payments or increasing the withholding from your own paychecks.
You can ask your employer to increase your W-2 tax withholdings by submitting a new Form W-4. This is often done to cover taxes on other sources of income, prevent a large tax bill at the end of the year, or to receive a larger tax refund. However, your employer cannot send additional payments beyond your withholding directly to the IRS on your behalf. For those, you would need to make separate estimated tax payments.
When should you begin calculating quarterly tax payments? As your wife transitioned to her contractor role a few months ago and received her final paycheck in August, it's crucial to address her updated tax situation right away. Estimated tax payments should be made based on when the income is earned, with payments for contractor income typically due four times a year:
- April 15: (01/01/XX - 03/31/XX)
- June 15: (04/01/XX - 05/31/XX)
- September 15: (06/01/XX - 08/31/XX)
- January 15 (of the IMMEDIATELY following year): (09/01/XX - 12/31/XX) or income earned September 1 through December 31
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