I have always been a W2 employee, and for the first time in 2020, I worked as a sole proprietor / individual contractor with no employees. I have not made any estimated payments to the IRS so far.
In 2020, I made $100K from 1099 contract work as a sole proprietor / individual contractor (from Jan 1-Apr 31). However, I will not receive a 1099 form until February 2021, and looking at some sample 1099-MISC forms (sample: https://cdn-0.smallbiztrends.com/wp-content/uploads/2014/01/1099-misc-sample-large.jpg), it looks like the form is not going to report / capture the dates when income was earned.
I recently learned that the Q4 estimated tax payments are not due until Jan 15, 2021, and am trying to figure out if I will owe any penalty for underpayment / no payment of estimated taxes. If the interest clock has already started and I am being penalized every day, then I will need to take action immediately (instead of by Jan 15, 2021, which would give me more time and I am obviously hoping is the case).
Would the IRS assume that the income was evenly earned throughout the year? Or will they give the independent contractor the benefit of the doubt and start calculating estimated tax underpayment penalties (at 3-5% of taxes owed) after Dec 31, 2020?
(I found that the IRS website has a long, complicated document and worksheet on figuring this out, but I could not find an answer to my question. I also posted a similar (albeit slightly different question) here and @Critter-3 pointed me to some helpful links. I ended up getting a paid subscription to https://selfemployed.intuit.com/ but was underwhelmed by the tools available - it does not calculate or tell me anything about estimated tax penalties..so I am asking a more targeted question here.)
Would I owe estimated taxes for 2020? If there is an underpayment penalty, what will it be (based on the numbers I shared) and is there a way to avoid it now?
Note: I had a small $100-200 underpayment penalty (as a W2 employee) in 2018, which I paid immediately (as part of TurboTax) when I did my taxes in Apr 2019. I mention this because I would also like to know about the penalty relief waiver mentioned here, and whether I would qualify.
@VolvoGirl @IreneS @TomYoung I am tagging you because you seem to have answered similar questions earlier. I would appreciate your input.
