Business & farm
@thebreddys wrote:Just one other question...I followed the Turbotax process to calculate estimated Federal and State payments. Do those calculations include self-employment tax, or is that an additional amount that must be paid?
Sorry, but I can't address any state estimated tax payments. There are too many states. But if the state estimated tax interview asked you if you expect SE income and how much in 2021, then I assume it does. As for Federal, here's some info:
So I presume you went through the "W4 and Estimated Taxes" interview. In the estimated taxes part of that interview, I assume it includes any SE tax because after you choose to adjust your income for 2021, there is a specific screen that should have asked about self-employment income expected in 2021. Did you report in that interview that you would have 2021 self-employment income? It looks like this:
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And one of the final screens asks which calculation method you want TurboTax to use.
It looks like this:
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There is a "Safe Harbor" choice (the first option) of figuring the payments based on 100% of your actual 2020 Federal taxes, if desired, instead of paying the amount (or 90% of the amount) of your estimated 2021 Federal taxes. Paying the quarterly taxes based on 100% (110% if a high earner) of the amount of your 2020 Federal taxes avoids any underpayment penalty, and is the easiest and safest way to figure estimated taxes each year that avoids the penalty. If you are a high earner, the amount is 110% of 2020 Federal taxes if your 2020 income was over $150,000 ($75,000 if Married Filing Separate).
NOTE: If you use that Safe Harbor rule of 100% of 2020 (or110%) to figure quarterly payments, while it avoids any underpayment penalty next year, if you have more income for 2021 than 2020, you may have taxes due at the time of filing your 2021 return, but at least with no penalty.
Your state may or may not have a similar "Safe Harbor" rule in regard to state estimated taxes.
