I work full time and receive a W-2. I am thinking of starting a side job (self employed) and want to know the income that comes in from the self employment, instead of paying the quarterly taxes into IRS, couldn't I just add it as extra on W4?
Is there anything wrong with this? After all when you file taxes it is all calculated into one anyways... are there any nit picking rules the IRS says you must pay it in quarterly separately? Or can I just pay this extra tax via W4 w/ my full time job?
As the owner of a sole-proprietorship or single member LLC, your business is considered a disregarded entity by the IRS. That's why all income/expenses for the business are reported on SCH C as a part of your personal tax return. Additionally, the owner of a business reported on SCH C can not be an employee or contractor of that business. As a disregarded entity all income received by the business is considered to have been received by the owner of that business. So under no circumstances can that owner issue themselves any type of tax reporting document, ever.
So things you can do is to increase the withholding at your W-2 job, of sufficient amount that will take care of your necessary quarterly payments on your self-employment income. It's simple really. If you look at the W-4, you can elect "Married, but withhold at higher single rate". Additionally, on line 6 you can specifically designate an additional dollar amount you want withheld from each of your paychecks.
Now understand that on the self employment income, it will be taxed at whatever tax bracket you fall in to, which is determined by your total income from all sources that you receive in the tax year. Then for the business income, if it's more than $400 you will pay an additional 12.6% self-employment tax. The SE tax is basically the "employer side" of your social security account contributions, and your Medicare contributions.
Overall, I find it much simpler to just send the IRS 20% of my gross business income each quarter. I do it online at http://www.irs.gov/directpay. Over the last 12-13 years this has always put me within $1000 of my final tax liability at the end of the year, so no underpayment penalties have ever been assessed on me (except once, when I did in fact, forget to pay a quarterly payment.)