Estimated Tax Payments

dianeth — Wed, 27 Oct 2021 16:07:59 GMT

I retired and had W-2 income through February 2021. I have been drawing Social Security since January 2021. I have a side business which typically shows a loss.

This year I will have 1099-MISC income from a contract job that I did. I did not pay estimated taxes since this is my first year of retirement and I anticipate a loss from my business. Should I make an estimated tax payment before the end of the year or wait and see if I owe any tax when my return is prepared?

Re: Estimated Tax Payments

carolineb — Wed, 27 Oct 2021 16:18:06 GMT

Hi Dianeth! Congratulations on your retirement. You have two items which may require estimated tax payments. Firstly, since you had W-2 income for a month before retirement, you may be taxed on a portion of your Social Security benefits based on the amount of your taxable income. You'll be taxed on: up to 50 percent of your benefits if your other taxable income is $25,000 to $34,000 for an individual or $32,000 to $44,000 for a married couple filing jointly, or up to 85 percent of your benefits if your other taxable income is more than $34,000 (individual) or $44,000 (couple).

Secondly, self employment income is subject to both federal income tax and self employment (Social Security and Medicare) taxes. You had stated that you anticipate a loss after deducting business expenses from your self employment income, in which case no estimated payment would be necessary.

If, after calculating the income above, you determine that you need to make an estimated payment to keep your federal tax liability on your return below $1000, keep in mind that you may also need to make an estimated payment to your state to keep any liability on your state return below $500 (unless you are lucky enough to live in a state with no income tax!)

topic Estimated Tax Payments in Self employed

Estimated Tax Payments

Re: Estimated Tax Payments