I'm a sole proprietor, but why does quarterly estimated taxes include spouse's income?

[KayLi1]

My spouse and I are filing jointly using 2022 Turbotax Home & Office (download), and I'm a sole proprietor while he works for a corporation. Why does the quarterly estimated tax include both of our income, when it should only include mine (self-employed)? Should I just ignore that and divide my SE tax by 4 and pay that online on IRS' website? And why should I do this if we pay my SE tax as part of our overall income tax filing? Wouldn't it be paying the IRS twice for my SE tax? Would appreciate your wisdom, thanks!

[GeorgeM777 · Accepted solution]

It includes both because you are filing jointly, and therefore, all income--you and your spouse--are included in the quarterly estimated tax computation. Your decision to pay just your part by dividing your estimated yearly net income by four is certainly an option.   You are correct in that if you get a refund, you have overpaid your tax liability.  It can be a little complicated trying to estimate with a fair amount of certainty what you might owe in terms of self-employment tax as well as income tax.  And you are right to suggest that your spouse may pay enough for the both of you to cover your self-employment tax.  

Your suggestion to just pay estimated tax payments based on what you believe will be your net yearly income from self-employment appears to be a good option.  So for now, just ignore your spouse's income and focus on your own self-employment income.  If you feel you are not withholding enough, you can always increase your quarterly payments to compensate for an unexpected, but perhaps welcomed, increase in income.  

@KayLi1 

[KayLi1]

Thank you for your quick response, George! So it sounds like you recommend estimating my self-employment quarterly tax on my own then paying it quarterly while we also pay our joint income tax and then expect a refund due to the overpayment? Is this right?

[AliciaP1]

Yes.  The reason you want to make the estimated payments for your self-employment taxes is to avoid the underpayment penalty that the IRS charges.

Per the IRS:

You may avoid the Underpayment of Estimated Tax by Individuals Penalty if:

• Your filed tax return shows you owe less than $1,000 or
• You paid at least 90% of the tax shown on the return for the taxable year or 100% of the tax shown on the return for the prior year, whichever amount is less.

@KayLi1  

[KayLi1]

Thank you for clarifying, Alicia!