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AraujoGJA
Returning Member

Additional income

I expect to receive some time this year at least one of the following additional sources of income:

- inheritance

- foreign 401k

side gig (independent consultant)

 

how can I better prepare for those events?

4 Replies
conniem123
Employee Tax Expert

Additional income

Hi AraujoGJA,  I understand you expect to receive other sources of income in 2022.  For the inheritance and foreign 401k there are factors that you need to consider if it is taxable income, including the type of inheritance is property or cash?  Coming from a trust or individual?  For your income as an independent contractor, that is self-employed income.  Many newly self-employed people are surprised at their tax bills at the end of the year because they notice they're suddenly paying a lot more in tax as a self-employed person than as an employee. That's because they're carrying the full burden of paying for their Social Security and Medicare.  Here is a great resource for self employed taxes,

 

https://turbotax.intuit.com/tax-tips/self-employment-taxes/the-self-employment-tax/L8xXjolB4

 

I hope you find this helpful!

 

 

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KochuK
Employee Tax Expert

Additional income

Hi AraujoGJA, thanks for your questions.

 

In general, inheritance is not taxable income. Once inherited, income derived from inheritance is taxable, such as interest income from cash received, rent received form inherited rental property, etc.

 

Generally, Foreign 401K is taxable income, should be reported on Form 1040, line 5a and 5b.

 

Side gig (independent consultant) is to be reported on Schedule C Profit or Loss from Business. Gross receipt less business expenses = net income, which is subject to your marginal income tax rate + approx. $14.13% self employment tax.

 

Please use 

TurboTax Tax Calculator 2021

https://turbotax.intuit.com/tax-tools/calculators/taxcaster/

to project your 2022 tax liability.

 

And use https://www.irs.gov/payments to make estimated tax payments for the short fall.

 

Hope the above helps.

 

 

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AraujoGJA
Returning Member

Additional income

Thank you so much. Yes, all additional income would be in cash. 
- inheritance: cash expected to be received upon selling of inherited property

- foreign 401k: cash expected to be received on full amount in a foreign account and transferred to domestic account after completion of withdrawal process of full amount of foreign 401k.

- side gig: payment expected upon completion of consultant services for a project.

AraujoGJA
Returning Member

Additional income

I highly appreciate the information.

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