Recently laid off, new contractor, but moving to full time in Mid September (Help with navigating Taxes)

[marcowhereru]

Hi, 

I was recently laid off in May, but I found work mid June as a contractor for two separate companies. My contracts ends on September 15 for both companies. I also start full time with a new company starting September 18. I have a few questions about what I need to do for my quarterly taxes. Also, my companies didn't take out the taxes out of my paycheck. To be safe I put away 20% from each pay check. 

1. How do I pay my quarterly taxes? 
2. What forms do I need to fill out? 
3. Will I need to fill out a form for each company? 
4. How can I use the tax calculator if the calculator is estimating taxes for 2022? 
5. How do I know how much I will be paying in quarterly taxes? 
6. Once I pay these taxes will I have to pay them next year when I do my 2023 taxes? 

Thank you for your help. 

[Sean Enrolled Agent]

Hello,

Welcome to the world of being self-employed! 

From your post, it sounds like you are doing the same type of work for the different companies.
Those companies should issue you a 1099-NEC by early 2024 in order for you to report your income to your state and IRS.

Generally, if you’re self-employed, you’ll need to make quarterly estimated tax payments unless you have taxes withheld from another source.

Most independent contractors pay estimated taxes to the IRS and to their state during the year. That way, they are paying as they earn income.
You can use the IRS Tax Withholding Estimator calculator located at this website: https://apps.irs.gov/app/tax-withholding-estimator

Once you have an idea of how much you will owe for 2023, you would then want to make estimated payments to the IRS so that you are paying taxes as you are earning the income.
You can use the IRS website in order to make estimated payments here: https://www.irs.gov/payments/direct-pay

Our tax system is known as a "pay as  you go" tax system. This means that the IRS expects taxes to be paid as income is earned. That was easy to do when you had a job and your employer paid taxes for you on each paycheck.
Now that you are an independent contractor, you will want to make sure that you take care of these payments during the year. If you wait until the end of the year, you could face some penalties and fines for not paying taxes during the year.

When you complete your tax return for tax year 2023, you will be asked if you made any type of estimated taxes during the year. You will use your information to type in how much you have already paid, and when you  paid your estimated taxes. 
That way you will not be double-taxed on your self-employment income.

For more help with how to plan for paying taxes as an independent contractor, please feel free to use the following websites for some tips and tricks:
https://turbotax.intuit.com/personal-taxes/self-employment-taxes/
https://turbotax.intuit.com/tax-tips/self-employment-taxes/beginners-tax-guide-for-the-self-employed...
https://turbotax.intuit.com/tax-tips/irs-tax-forms/what-is-form-1099-nec/L5fbwIFSn