Independent Contractor Taxes

[garrapatta]

Hello,

In March of 2018, I was hired as an independent 1099 contractor. I have never worked one or paid taxes myself. I was paid $5000 in June and $11000 in September. I know I was supposed to pay taxes quarterly, but my friend told me since I have not made that much, even if there's penalty, it won't be much. But now I am concerned. How do I calculate the estimated taxes? I bought a computer and other office furniture for the job. And I had another part-time job meanwhile, which only paid $300-$400 a month. Thank you in advance. 

[Carl]

If you send the IRS 20% of your gross business earnings *right now*, that will reduce your underpayment penalties that are accumulating, and will prevent (or at least reduce) the amount of paperwork you will be doing to claim exemption from those penalties, if they are in fact, assessed. If your state also taxes personal income, then don't forget about quarterly taxes to your state too.

http://www.irs.gov/directpay for the federal taxes.

[garrapatta]

Carl, thank you for your help. Do I need to send any forms or can I just make the payment? Also, I had some expenses related to my work as an independent contractor that can be written off, do I worry about it when I file taxes next year? Thank you so much!

[Carl]

So long as your business does not have any W-2 employees, just make the payment on line and make sure to print your receipt and file it with your 2018 business records.  NOw if your state taxes personal income, you'll need to pay your state quarterly taxes too. Not all states offer the option to pay online though.

As for your business expenses, and other stuff, don't worry about dealing with it until tax filing time. But I do urge and highly encourage you to keep finely detailed records of every penny in and every penny out of your business. There's three rules to always keep in mind when dealing with the IRS.

1) You are guilty until proven innocent.

2) The burden of proof is on the accused (that would be you!) and not the accuser.

3) If it's not in writing, then it did not occur.

[garrapatta]

Carl,

I don't have a business. I am just an independent contractor (1099) hired to work on a linguistic project which is now over.   I got paid for the project and am lost as to how to calculate my taxes. I've always been a W-2 employee, this is my first time as 1099 contractor. Thank you so much for your help!

[Carl]

As far as the IRS and your state is concerned, you do have a business and are self-employed. The only difference between an independent contractor and a sole proprietorship is the spelling. Literally! So yes, you are self employed and you do have a business as far as the IRS is concerned. All income reported to you in box 7 of that 1099-MISC is self-employment income and will be reported as such on SCH C as a part of your personal 1040 tax return.