Get your taxes done using TurboTax

If you're going to work in 2018 as an independent contractor for the entire year, then you probably will have to make some amount of estimated tax payments.  (Paying estimated taxes certainly won't affect your ability to determine how much you make for a full year.  That's simply the amount of revenue you take in minus costs to generate that revenue.  Even if you don't pay estimated taxes in 2018 you're going to pay the taxes you owe in April, 2019 so we're only talking about a "timing difference" as to when you pay the tax.)

You seem to understand that one way or another you need to remit taxes on a "pay as you go" basis - either taxes withheld from a paycheck or estimated taxes you remit more or less quarterly - to get you into one of the "safe harbors" so as to not get charged with an underpayment penalty.  (It's perfectly OK to owe the IRS a ton of money when you file your income tax return, as long as you're in a safe harbor; that way the check you write won't include underpayment penalties, it will be simply the taxes you owe.)

Most taxpayers will avoid being underpaid if they:

1) owe less than $1,000 in tax after subtracting their taxes WITHHELD and available tax credits,

OR

2) if they paid at least the lesser of
       a) 90% of the tax for the current year, or
       b) 100% of the tax shown on the return for the prior year.  (If last year's return shows AGI over $150K (for married filing jointly) then change that "100%" figure to "110%.)

One thing you're going to have to keep in mind is that the "tax for the current year" is going to include Self Employment taxes (Social Security and Medicare) at roughly a 15% tax rate.

As to your question "How does a previous partial year change your requirements in regards to estimated tax?" the answer is "it doesn't, really."  Your "100% of the tax shown on the return for the prior year" is going to include some 2017 SE taxes for your 7 or 8 weeks of 2017 independent contractor work, so it makes your 2017 tax a bit higher than it would have been if you'd been an "employee" for the entire year, but that's all.

So when you complete your 2017 income tax return you'll want to work through the "W-4 and Estimated Taxes" interview.  There you'll make your best guesses as to what your 2018 income tax return will look like and TurboTax will give you a range of estimated tax payments you could choose to select to get you into one of the safe harbors.

As far as I know most states have adopted rules with respect to underpayment that are similar to the federal rules, albeit with different amounts.  I know nothing about SC Taxes but it sure looks to me like SC has followed the federal rules:

https://dor.sc.gov/forms-site/Forms/SC2210_01132016.pdf#search=underpayment%20penalties

Tom Young




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