First time working as a contractor, what are important informations and dates I should know about.

[joannaj101]

Hello, I am working as a contractor for the first time and has signed a W-9 and confirmed that I will receive a 1099 report next year for annual tax filling.

I was wondering what quarterly taxes are and how/why do I need to do them. How often do I need to do them(as in the months I need to submit them in)?

What forms will I need to use for quarterly taxes, and if there are any other information I need to know as a contractor(as in do I count as a business and does California has specific laws for contractors).

Lastly, since I work remotely, is there any way to offset my finances if I use my own equipment for work? 

Thanks!

[Gabriella_EA]

Hello @joannaj101!

Congratulations on starting your new contracting work! It's exciting to start something new, and we've got lots of great resources to help you navigate the changes!

The US tax system is a pay-as-you-go system, which is why when you have an employer and receive a W-2, you have withholdings and pay your taxes (to your best estimate) each pay period. When you're self-employed, there aren't any withholdings on that, so you make quarterly estimated tax payments to cover your tax liability throughout the year, rather than paying it all at the end of the year when you file your return (which often involves penalties if you've underpaid). If you're still working a W-2 job, some employees choose to have more income tax withheld from their paychecks to cover their extra income from self-employment work instead of paying quarterly estimated taxes. If you choose to or need to pay quarterly estimated tax payments, this IRS table is a really nice resource for when you should make each payment for each period's earnings. The nice thing with estimated tax payments is that paying quarterly is plenty as those are the due dates! There's no need to pay bi-weekly or even monthly.

You can use Form 1040-ES to make a quarterly estimated tax payment, or you can make a payment directly online at the IRS website.

It's brief, but here's a good initial resource on being self-employed in CA: https://www.ftb.ca.gov/file/personal/filing-situations/self-employed.html

And a specific link on CA estimated tax payments: https://www.ftb.ca.gov/pay/estimated-tax-payments.html

There are lots of different expenses you can take as a contractor, including potentially for using your own equipment or using a home office. Here are some more resources on that:

• Reporting Self-Employment Business Income and Deductions
• The Home Office Deduction
• Depreciation of Business Assets

I hope that information is helpful to you, but please feel free to ask follow-up questions in the thread. I'll keep an eye out and continue to answer any new questions you have!

[bkaytaxes]

Hello @joannaj101 !

Great questions and thanks for joining us today for the event!

When we earn money from providing goods or services the IRS requires we pay taxes.  When we work for an employer, the taxes are paid for us every time we get a paycheck.  When we work for ourselves that responsibility falls on us.   The IRS requires us to pay taxes as we earn income and to make it more streamline the IRS has the quarterly system in which we pay taxes on the profit from our business.  Here is a helpful link with all the deadlines and details you need to know Quarterly Tax Payment Details       You can also pay the taxes directly  on the IRS website - this is a fast and easy option and also allows you to track your payments in one place (first step is to create an IRS account if you don't have one already) IRS Payment Portal  .  Here is a link to the IRS website for the forms and instructions:     Estimated Tax Payment Forms and Instructions 

Each state has its own set of rules for estimated taxes, and California is no exception.  Here is the link for the California Tax Board that covers self employment taxes.  California Self Employment Taxes .  If you expect to owe taxes you are required to pay as you go, similar to the federal tax requirement the IRS has in place.  There is a link on this page that also goes into how to calculate and pay self employment taxes.

Great news, working remote is a great opportunity to be able to write of expenses around the home or wherever you work outside of an office.   If you owned equipment prior to starting your business but then began using if for business you will be able to depreciate it based on the fair market value of when the business began .  Turbo Tax will walk you through the steps for claiming eligible expenses.

Turbo Tax is here to support you on your new journey, so please feel free to reach out whenever there are questions!

[joannaj101]

Hello! Thanks for the helpful information Gabriella.

I figured out my estimated tax, but I just have some questions before I make an online payment. I actually missed the first 2 quarters of the quarterlies before I realized there's something called a quarterly, since I didn't pay, I know I have a penalty. However, I found out that there was an extension for disaster areas for the previous quarterly, and I can pay my previous quarterly(3 all together) on September 16. The IRS and the Franchise Tax Board have different information: Orange County, where I am located, is not in the IRS disaster zone while the FTB has Orange in its information.

https://www.irs.gov/newsroom/irs-announces-tax-relief-for-victims-of-severe-winter-storms-flooding-l...

https://www.ftb.ca.gov/about-ftb/newsroom/news-releases/2023-13-january-tax-relief-for-winter-storms...

So I just want to know if I am qualified under the relief.

If the situation is that I do not fall under the relief and I have to pay this September 15, do I just pay for the penalty amount when I file for taxes in April 2024? If that's true, can I also apply for penalty relief if this is my first time?

https://www.irs.gov/payments/penalty-relief-due-to-first-time-abate-or-other-administrative-waiver

Hope to hear back soon!

[Gabriella_EA]

Hello again @joannaj101! 

Great research, and great callout. Orange County is covered under the IRS/CA disaster relief for 2022, so you can make all three quarterly payments on or by 10/16/23* without incurring a penalty. If you reside in Orange County, you shouldn't have to do anything besides actually making the payments by the extended October deadline to qualify for the exemption from the penalty. This applies to both IRS and CA estimated tax payments.

Here is an IRS release that does have Orange County listed: https://www.irs.gov/newsroom/irs-provides-tax-relief-for-victims-of-severe-winter-storms-flooding-la...

*"Affected taxpayers that have an estimated income tax payment originally due on or after March 9, 2023, and before Oct. 16, 2023, are postponed through Oct. 16, 2023, will not be subject to penalties for failure to pay estimated tax installments as long as such payments are paid on or before Oct. 16, 2023."