I was both a W2 and 1099 employee in 2016. I need some help understanding what forms I need to submit and when to make estimated payments.

[kcdc42]

I was a W2 employee from Jan to Oct & a 1099 employee from Nov-Dec (through a different employer). This is the first time for me as a 1099 employee so I am not very familiar with 1099 tax laws. I do know that I owe the IRS taxes because nothing was deducted for the two months I worked as a 1099 employee.  I am now back to W2 as of Jan 1st. 

1) How/when do I make estimated payments for 2016? Am I late in making payments already or can I wait till April 15 of this year?

2) Do I simply fill out the 1040 (like I did last year for W2) and add 1099 income to that? I need some help on what forms I need to fill.

[JaimeG · Accepted solution]

Yes you are correct, you will prepare your return as you did last year regarding the W2 income. The income from which you received a 1099-MISC is where the options present themselves.

When you receive a 1099-MISC with an amount entered in Box 7 you are considered an Independent Contractor. What this means is that you are basically Self-Employed and are allowed to create and deduct expenses which are directly related to the work performed. This brings us to the option of using Schedule C to report the 1099 that you received. This option will allow you to enter these expenses. TurboTax will walk you through the entering of these expenses and provide you with a broad view of what these expenses might be.

If you don't have any expenses that are related to the work performed for this 1099 income then the program will consider the 1099-MISC as taxable income and appropriately issue the Self-Employed tax on the entire amount but will also provide the additional deduction as well. Yes you are correct in expecting to pay taxes on the money you earned in these two months.

Estimated Payments

The Federal Withholding from the employer that provided the W-2 are considered estimated payments on your behalf. It is highly likely that you have met or exceeded the required amount. The IRS States:

"Generally, most taxpayers will avoid the penalty if they either owe less than $1,000 in tax after subtracting their withholding and estimated tax payments, or if they paid at least 90% of the tax for the current year or 100% of the tax shown on the return for the prior year, whichever is smaller."

Your Federal Withholdings in your W2 should represent this amount or better.

[Critter]

FYI ... you were a sub contractor whose payment was reported on a 1099-misc ... you were NOT and employee and they were NOT your employer. Since you were self employed you will file a Sch C along with your federal form 1040. 

If you have net self employment income of $400 or more you have to file a schedule C in your personal 1040 return for self employment business income. You may get a 1099-Misc for some of your income but you need to report all your income.  So you need to keep your own good records. Here is some reading material……

IRS information on Self Employment….
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Self-Employed-Individuals-Tax-Center 

Publication 334, Tax Guide for Small Business
http://www.irs.gov/pub/irs-pdf/p334.pdf 

Publication 535 Business Expenses
http://www.irs.gov/pub/irs-pdf/p535.pdf 

Home Office Expenses … Business Use of the Home

https://www.irs.gov/businesses/small-businesses-self-employed/home-office-deduction

https://www.irs.gov/pub/irs-pdf/p587.pdf

There is also QuickBooks Self Employment bundle you can check out which includes one Turbo Tax Home & Business return and will help you keep up in your bookkeeping all year along with calculating the estimated payments needed ....
http://quickbooks.intuit.com/self-employed

Self Employment tax (Scheduled SE) is generated if a person has $400 or more of net profit from self-employment on Schedule C.  You pay 15.3% for 2014 SE tax on 92.35% of your Net Profit 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.  You do get to take off the 50% ER portion of the SE tax as an adjustment on line 27 of the 1040.  The SE tax is already included in your tax due or reduced your refund.  It is on the 1040 line 57.  The SE tax is in addition to your regular income tax on the net profit.
 


PAYING ESTIMATES
For SE self employment tax - if you have a net profit (after expenses) of $400 or more you will pay 15.3% for 2015  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 (or next 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 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 (H&B version)
Other Tax Situations
Other Tax Forms
Form W-4 and Estimated Taxes - Click the Start or Update button