I will have a small amount of w-2 income this year and the rest will be 1099. If the net amount on the Schedule C is about $40,000 after expenses and as it moves over to 1040 and then basically is zero or would have given an refund, do I need to pay the quarterly tax? And if so, how do I estimate it as it as the income varies. Should i just pay a percentage of the quarterly income(top line)?
Hi craigv,
Hope all is well with you. If you have a net profit of $40,000, you would pay self-employment taxes (social security and medicare taxes) and ordinary taxes.
We recommend you use our Tax Calculator to estimate your tax liability and make estimated tax payments to the IRS and your home state. The IRS deadlines are currently 9/15/23 and 1/16/2024. When your income varies, we suggest to use the tax calculator.
What do you mean by "basically zero or would have given a refund"?
Cheers,
Laura
Thank you for your question. As stated in the text of it you will have W2 income and that income will be reported as usual. The new item will be the Schedule C income with an estimated net income of $40K. The $40K I am assuming is net income since you stated after expenses. The schedule C income will be added to ordinary income and included to your taxable income calculation. In addition, you will have to pay 15.3% in self employment tax on the net income of the business. The net income is a combination of social security and medicare taxes. I would recommend to file quarterly estimate tax payment since the income and tax liability will be above thresholds that may incur penalties and interest if not filed in a timely fashion. I will include two links below. The first link is the irs 1040S that includes explanation of calculation, vouchers, and due dates. In addition, a tax estimator to see how your overall taxes will be impacted and estimated. I hope this helps and answers your question.