SE tax calculation - W2 until July, 1040-ES in Aug

[big sunglasses-23]

Hi all, 

I have a tax quandary for you. I was a W2 employee from Jan - July of this year and starting in August became self-employed. If my net wages from Jan-July was 50,000 and my estimated self-employment wages from Aug-Dec will be 20,000, what is my self-employment tax? 

I'm following the 1040-SE but really struggling to understand how to take into account that most of my income from 2024 was W2, not self-employed!

Thanks!

[xmasbaby0]

If you have self-employment income for which you will pay self-employment tax for Social Security and Medicare,  you will need to use online Premium software or any version of the CD/download so that you can prepare a Schedule C for your business expenses.

https://ttlc.intuit.com/questions/2926899-how-does-my-side-job-affect-my-taxes

https://ttlc.intuit.com/turbotax-support/en-us/help-article/form-1099-nec/1099-nec/L5qTsBiSe_US_en_U...

https://ttlc.intuit.com/community/self-employed/help/how-do-i-report-income-from-self-employment/00/...

https://ttlc.intuit.com/community/self-employed/help/what-is-the-self-employment-tax/00/25922

https://ttlc.intuit.com/questions/2902389-why-am-i-paying-self-employment-tax

https://ttlc.intuit.com/questions/1901340-where-do-i-enter-schedule-c

https://ttlc.intuit.com/questions/3398950-what-self-employed-expenses-can-i-deduct

https://blog.turbotax.intuit.com/self-employed/self-employed-tax-deductions-

calculator-2021-2022-50907/

https://ttlc.intuit.com/questions/1901110-do-i-need-to-make-estimated-tax-payments-to-the-irs

https://turbotax.intuit.com/tax-tools/calculators/self-employed/

[Hal_Al]

"Self Employment Tax" (SET) is how the self employed pay their social security and medicate tax.  SET is paid in addition to the income tax you pay on your net self employment profit. 

For purposes of quarterly estimated tax payments (Form 1040-ES), for your income range,  you can figure 15.3% for SET plus 12%  for income tax. 

[dmertz]

"If my net wages from Jan-July was 50,000 and my estimated self-employment wages from Aug-Dec will be 20,000, what is my self-employment tax?"

In this case where the Social Security Wage Base is not reached:

SE tax = $20,000 * 0.9235 * 0.153 = $2,825.91

[big sunglasses-23]

Ok right, that part makes sense to me! How do my standard deductions factor into that, then? 

[VolvoGirl]

The Standard Deduction will reduce your total W2 & SE income and income tax on it.  But it won't affect the Self Employment tax.  Even if you don't owe any income tax you still have to pay the self employment tax.  

You don't have "wages" from your self employment.   You are not an employee of the business. You don't pay yourself.   All the business income and expenses are your personal income and expenses in the first place.  You just fill out a Schedule C. The net profit or loss is your income.   You pay income tax and SE tax on the NET PROFIT after expenses on Schedule C.  Is the 20,000 your total SE income or the Net Profit?  

[AmeliesUncle]

Any chance you are using the CD/downloaded version of TurboTax?

If you are, in my opinion the easiest way to figure things out is to take your 2023 return and "Save As" to create a second file to make a 'mock' 2024 return with your estimated amounts.  You would enter your estimated 2024 W-2, your estimated 2024 business income and expenses and any other changes that could be pertinent (if you have children, you may want to edit their birthdate to make them one year older, to reflect 2024).

If you do that, you'll see your estimated 2024 results.  If it shows you owe money, divide that amount by 2 (for the two quarters from July to December) and that is what each Estimated Tax Payment should be.