estimated tax

[Wajed]

How can i estimate quartely taxes?

Also, I have a full time ( that gives me a W2 and pension), I also have a side job that gives me 1099 at the end of the year. Can I establish a self-employed 401K plan? keep in mind that I did not establish a buisness with EIN number. Thanks

[VincentL]

Taxes must be paid as you earn or receive income during the year, either through withholding or estimated tax payments. This includes your 1099 income.

If the amount of income tax withheld from your salary or pension is not enough, or if you receive income such as interest, dividends, alimony, self-employment income, capital gains, prizes and awards, you may have to make estimated tax payments. If you are in business for yourself, you generally need to make estimated tax payments. Estimated tax is used to pay not only income tax, but other taxes such as self-employment tax and alternative minimum tax.

If you don’t pay enough tax through withholding and estimated tax payments, you may be charged a penalty. You also may be charged a penalty if your estimated tax payments are late, even if you are due a refund when you file your tax return.

To calculate your estimated taxes, You will add up your total tax liability for the current year—including self-employment tax, individual income tax, and any other taxes—and divide that number by four.

Yes. You can setup a SE 401k plan. A self-employed 401(k) is a qualified retirement plan for a small business where the only employees are the owner(s) of the business and/ or the spouse(s) of the owner(s) if they work for the business. You shouldn't use this plan if you have any other employees. You can't use your Social Security number to setup the plan. If you don't have an EIN, apply for one online at IRS.gov.

[RSUMan]

The easiest method to keep up with estimated taxes from your side venture:

• Set a time each month for you "Board Meeting"
• For example, third Sunday of the month 4 PM to 5:30 PM
• Keep track of your revenue and expenses in a file folder
• The major miss for self-employed taxpayers is failure to track expenses
• At the end of each month, total up your profit
• If your W-2 job does not take you to the 2023 Social Security maximum of $160,200, you will owe 15.3% self employment tax on the profit
• You will also owe income tax on the profit, most likely at your Marginal Tax Rate
• You can locate your Marginal Tax Rate at the bottom of your 2022 Tax History Report in TurboTax
• So if you are in a 12% marginal tax bracket, you add 12% plus 15.3% and deposit 27.3% of your profit in accordance with IRS "When to Pay Estimated Tax":

January 1 through March 31 period, make deposit on April 15

April 1 through May 31 period, make deposit June 15

June 1 through August 31, make deposit September 15

September 1 through December 31, make deposit January 15

Regarding a Self-Employed 410 (k), you may have multiple 401 (k) plans and there are contribution limits based on the specific characteristics of the two plans.  The specifics of your situation with respect to the pension plan at W-2 work and the set up of your Self-Employed plan would need to be reviewed carefully.

[Wajed]

thanks for the response.

what tax benefits would I get if I establish a buisness with an EIN#? 

[RSUMan]

The only reason to have EIN is if you need to pay employees or if you do not want to give your personal Social Security Number to your customers who are making payments to you.