Greetings, first year working as a consultant. And will receive a 1099. How can I calculate and then request deductions needed for taxes - I prefer not to receive a refund nor owe. Payment and taxes held to be balanced. Thank you for your assistance and guidance.
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Since there are no withholdings on 1099 income, you will need to adjust the W-4 with your employer to account for the extra income which can be done in section 2. If the 1099 consulting work is your only income I would recommend making quarterly payments based on your income to both fed and state. You can do this going to the state website and make a tax payment (where/what to click depends on the state).
Federal - https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes
You can also use the Turbo Tax W-4 tool to estimate your tax liability and determine what tax bracket you are in.
This will help you determine how much you should pay in estimated payments each quarter.
Receiving a 1099 in most instances means you are self employed or contracted to work with a company. Most companies that have contractors will not withhold taxes based on a form W-4.
In your situation you would need to pay estimated taxes on your projected income if form W-4 isn't an option. You may use the W-4 calculator tool to calculate potential taxes based on your projected total income. Keep in mind, you will also be required to pay social security and Medicare taxes. Here are some links that will assist you in calculating the required information:
https://turbotax.intuit.com/tax-tools/calculators/w4/
https://www.irs.gov/taxtopics/tc554
https://www.irs.gov/businesses/small-businesses-self-employed/self-employed-individuals-tax-center
Thank you for joining us today and have a great rest of your day!
SMcKnight, EA
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If you are being paid on a Form 1099 for tax purposes, you are considered to be self-employed.
The payer has no obligation to withhold taxes on your behalf.
Self-employed individuals are referred to as Independent Contractors by the IRS.
Simply put, an independent contractor is considered to perform the agreed upon work setting her own schedule, using her own methods, and maintaining her own, independent record of all income and expenses.
The IRS has many factors by which to identify an Employment Relationship . These include, among many others, working on a fixed schedule set by the employer, performing the work according to the employer's directions and policies and adhering to a dress code.
In your situation, the payer has determined that the services you'll perform do not constitute an employment relationship, and your income from the payor will be reflected the following tax year on Form 1099.
If you are paid on a 1099, the IRS considers you to be an Independent Contractor.
Accordingly, you must withhold your own taxes. It will be up to you to decide how best to pay state and federal taxes due on sums received for your work as a consultant. It's possible to make estimated Quarterly Tax Payments .
You will also be required to add additional forms to your tax returns other than those you are used to such as Schedule C, which reflects the income and expenses of the self-employed.
You may also be required to pay Self-Employment Tax.
There is a silver lining! TurboTax has a great Tax Guide For the Self-Employed.
We can also help you in How to File Self-Employment Taxes (Understanding the Forms & Process) as well as offer Live Help as you embark on your journey as a consultant.
@TomSmith15 Do you also have a W2 job?
1099NEC is self employment income and you HAVE to file it on Schedule C and pay self employment tax on it. The SE tax is to pay both the Social Security and Medicare tax that wasn't taken out like on a W2 job. You can increase your W2 job withholding to cover the 1099NEC self employment tax or send in Quarterly Estimated payments.
You will pay Self Employment tax (Scheduled SE) on a Net Profit of $400 or more on Schedule C in addition to regular income tax on it. You pay 15.3% SE tax on 92.35% of your Net Profit (If it is greater than $400). The 15.3% self employed SE Tax is to pay both the employer part and employee part of Social Security and Medicare. So you get social security credit for it when you retire.
Turbo Tax guide to Estimated taxes
A Guide to Paying Quarterly Taxes - TurboTax Tax Tips & Videos
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