Wife became self-employed in January, file in September?

[mspeterson36]

Hi all,

My wife just began work as a missionary at January of this year.

Due to my ignorance, I thought she could file her income tax at the end of the year like everyone else.

Should she file her quarterly self employment tax in September because I missed the April and June deadlines?

Should I wait til another date?

Her earnings are pretty small, about $750 per month which she gets as many small monthly donations from individual people— $25, $40, $100, $20, etc.

From January 2019 to the present, she has earned a total of about $6406.

please let me know when to file, thank you so much!!!

[Carl]

There is a difference between "paying quarterly taxes" and "filing a tax return".

Quarterly taxes are paid to the IRS each quarter. You also have to pay your state quarterly taxes separately if your state taxes personal income. You only "file" your tax return once a year.

Now the IRS has instructions with worksheets for figuring your quarterly taxes at https://www.irs.gov/pub/irs-pdf/f1040es.pdf. But in my 15 plus years being self-employed I don't waste my time with that. Instead, I just send the IRS 20% of my gross business earnings each quarter. Then come tax filing time it all works out in the wash. For 13 of my 15 years I've always got a refund of some of that quarterly tax payment back. In the two years I actually owed a bit more, it was always less than $500.

If you do the worksheets to figure your quarterly taxes, you'll find that it will come to between 19-21% of the gross business income for the quarter. So I don't waste my time with it and just send the IRS 20% each quarter.

Should she file her quarterly self employment tax in September because I missed the April and June deadlines?

Why wait? The longer you wait, the more the underpayment penalties keep adding up. You should be at least the first two quarters immediately, if not sooner. You can do so "right now" at http://www.irs.gov/payments. Make sure you print the receipt when done and file it with the business records so you'll have it at tax filing time.

From January 2019 to the present, she has earned a total of about $6406.

So I would go ahead and send the IRS 20% of that ASAP, which comes to $1,281. In fact, I'd go ahead and pay $1,400 and consider myself "good" for the third quarter too. If you do that, then when paying on line make "sure" you designate it's a 2019 1040-ES payment for the "THIRD" quarter. Do not bother trying to split things and reporting an amount for each quarter separately. Just pay the total amount due "today" as a third quarter payment. Spliting it up will make absolutely no difference in any late payment penalties if (and only if) any such penalties are assessed. Due to the low amount of business income, there most likely wont' be any penalties assessed. But that depends on the amount of taxes paid through other means, such as your W-2 withholdings each pay period.

[mspeterson36]

Thanks a million!!!

I appreciate the thorough reply!

I’ll get right on that now!

🙂

-Matt

[mspeterson36]

Would you be so kind as to answer another question?

Another of my wife’s coworkers also began work as a missionary, and he did not begin receiving monthly donations (earnings technically,) until the very end of July. 

Now in his case, should he  BEGIN his estimated quarterly payments starting in September, even though this is considered the “Third Quarterly Payment”? His donations from about July 30th to date are $1100.

Thank you again for any help you can offer!

He, and my wife were initially advised to just wait until the end of the year to file and pay all the taxes at once, since they wouldn’t be able to predict how much they would earn from donations month to month.

[mspeterson36]

Hi, would you please be able to address my 2nd scenario?

[VolvoGirl]

The first year you don't need to pay estimates as long as you pay in (by withholding) as much as your tax was last year.  But if you will have a big income you should send in estimates so you don't owe too much next April on your tax return.

For SE self employment tax - if you have a net profit (after expenses) of $400 or more you will pay 15.3% SE Tax on 92.35% of your net profit in addition to your regular income tax on it. So if you have other income like W2 income your extra business income might put you into a higher tax bracket.

You must make quarterly estimated tax payments for the current tax year if both of the following apply:

- 1. You expect to owe at least $1,000 in tax for the current tax year, after subtracting your withholding and credits.

- 2. You expect your withholding and credits to be less than the smaller of:

    90% of the tax to be shown on your current year’s tax return, or

  100% of the tax shown on your prior year’s tax return. (Your prior year tax return must cover all 12 months).

To prepare estimates for next year you start with your current return, but be careful not to change anything.  For Online returns, if you can't get back into your return, Click on Add a State to let you back into your retun.

You can just type W4 in the search box at the top of your return , click on Find. Then Click on Jump To and it will take you to the estimated tax payments section. Say no to changing your W-4 and the next screen will start the estimated taxes section.

Or Go to….

Federal Taxes or Personal (Desktop H&B)

Other Tax Situations

Other Tax Forms

Form W-4 and Estimated Taxes - Click the Start or Update button

The 1040ES quarterly estimates are due April 15, 2019, June 17, Sept 16 and Jan 15, 2020.  And don't forget your state.  Go to the end of the state section, probably under Other Tax Situations

To just estimate the remaining quarters put in that you paid $1 for the missed quarters so it will only calculate the remaining quarters.

Here are the blank Estimates and instructions…..

http://www.irs.gov/pub/irs-pdf/f1040es.pdf

[mspeterson36]

First of all, forgive me for my absence from the thread; one of my 10 year old daughter’s classmates was struck by a car while crossing the street, and died. A huge tragedy, and I haven’t been doing much online because of that.

Next, thank you so much for your in depth reply!

I have some questions about your responses I hope you can clarify, though.

1.

“The first year you don’t need to pay estimates as long as you pay in (by withholding,) as much as your tax was last year”

The gentleman was exempt from taxes, as he is a disabled vet. He worked minimally last year (earned around $5000,) and got a tax credit at the end of the year. So how would your statement above apply then, as he didn’t owe anything last year?

2. In the case of my wife (her story at the beginning of the thread,) she has NOT been working as a missionary for a whole year; she started receiving donations in January of this year. Therefore, should SHE begin paying quarterly payment on the September date?

You would be surprised at how little information there is online regarding how to file taxes as a missionary!

Thank you sincerely,

Matt