Hi Dhauze!
Congratulations on your retirement!
I will assume that your duties and responsibilities as a 1099 contractor are different from when you were a W-2 employee and assume that your former employer is not misclassifying you as a contractor when you should continue as a W-2 employee.
Since you will receive a 1099 for your compensation, you are considered self-employed. Your income (less any expenses) is reported on Schedule C on your personal tax return.
The tax on your Form 1040 will include both your income taxes AND self-employment taxes, which cover social security and Medicare taxes. There is no separate form - just your annual tax return. Self employment tax is 15.3%, which is double the rate that employees have deducted from their paychecks. This is because the self-employed person pays both halves of the tax. For W-2 employees, the employer pays the other half.
You will want to make quarterly estimated payments for the income tax and self-employment tax associated with your consulting work. The next due date is 9/15/2024 for income through 8/31. The 4th payment is due 1/15/2025.
You can make the estimated tax payments on the IRS website at www.irs.gov/payments.
You'll want to aim to have paid in either 90% of the 2024 tax liability or 100% of your 2023 tax liability.
Here's a guide to paying estimated taxes: A Guide to Paying Quarterly Taxes
Thanks for participating in TurboTax's Ask the Expert event today. I hope this information was helpful!
Sincerely,
Kimberly, CPA for over 30 years
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