First time self-employed

[MonicaS1]

Hello,

This is the first time that I'll be filing as a self-employed/business owner individual. I'm a nanny, and I don't know how to file my taxes this year since I don't have any forms from a company, and the families don't do post-tax payments with me.

Do I need to sign up for a program to pay my quarterly taxes? What are the step-by-step instructions for quarterly and yearly tax filings?

Thank you, I'd appreciate all the help that I can get.

[KarenL4 · Accepted solution]

Hi,

Great questions!

Whether or not you get tax forms, you are legally required to report all of your worldwide income. Likely, if you haven't elected to have it treated otherwise and you are doing this business by yourself, you would be a sole proprietor filing a schedule C along with your form 1040.

A lot of newly self-employed folks are not aware that they have to pay self-employment taxes in addition to income taxes.  Self employment taxes are 15.3% of your net self-employment income (you do get a deduction for 1/2 your self-employment taxes. This article explains in detail.

If you expect to owe more than $1,000 in federal taxes for the tax year, you may need to make estimated quarterly tax payments using Form 1040-ES, or else face a penalty for underpayment.  This article explains more and talks about the safe harbor (which I have recapped below).

To determine whether you need to make quarterly estimates, answer these questions:

1. Will you owe less than $1,000 in taxes for the tax year after subtracting your federal income tax withholding from the total amount of tax you expect to owe this year? If so, you're safe—you don't need to make estimated tax payments.
2. Do you expect your federal income tax withholding to amount to at least 90 percent of the total tax that you will owe for this tax year? If so, then you're in the clear, and you don't need to make estimated tax payments.
3. Do you expect that your income tax withholding will be at least 100 percent of the total tax on your previous year's return? Or, if your adjusted gross income (2022 Form 1040, line 11) on your tax return was over $150,000 ($75,000 if you're married and file separately), do you expect that your income tax withholding will be at least 110 percent of the total tax for the previous year? If so, then you're not required to make estimated tax payments.

If you answered "no" to all of these questions, you must make estimated tax payments using Form 1040-ES. To avoid a penalty, your total tax payments (estimated taxes plus withholding) during the year must satisfy one of the requirements we just covered.

To do a deeper dive on your personal situation, you may wish to reach out to a live tax expert at Intuit (https://turbotax.intuit.com/personal-taxes/online/live/) or provide more specific details in a follow up message.

*Say "Thanks" by clicking the thumb icon in a post

**Mark the post that answers your question by clicking on "Mark as Best Answer"

Best,

Karen