1099 Individual Contractor

[Sammyhiro]

So, this current year (2023), I worked as a 1099 individual contractor for less than 2 months. I recently got paid $1400 in October for services rendered. I know that you have to submit a 1040 ES every quarter to pay the estimated taxes owed. Last year (2022) I did not file any tax return because I was a full-time student and did not earn any income. The only income I have earned this year has been $1400. Do I still have to file 1040 ES for the $1400 that I earned? My filing status two years ago was Head of Household with 3 dependents since my wife is a non-US citizen and wasn't working at the time. If this year I am required to file a tax return, should I file as married but filing separately due to my wife being a foreigner? What is the upside and downside of filing as Head of House over Married filing separately in terms of 1099 individual contractor? Can I fill a 1040-ES using TurboTax? I forgot to mention that I currently reside overseas in Japan. Any help or guidance would be greatly appreciated. Thank you. 

[TomD8]

This TurboTax help article explains your filing options when your spouse is a non-resident alien:

How should I file my taxes if my spouse is a nonresident alien? (intuit.com)

And, per the IRS:

You don’t have to pay estimated tax for the current year if you meet all three of the following conditions.

• You had no tax liability for the prior year
• You were a U.S. citizen or resident alien for the whole year
• Your prior tax year covered a 12-month period

You had no tax liability for the prior year if your total tax was zero or you didn’t have to file an income tax return. 

https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes#:~:text=You%20don't%20....

[pk]

@Sammyhiro , generally agreeing with @TomD8 , I am just wondering if you have any other source of income -- i.e. US$1400 is surely not enough to feed a family.  Therefore do you have other income sources  w-- which might require to file a return.

Also  assuming that you are a US person ( citizen / GreenCard),  what visa is your spouse on ?  Why did you not consider  filing MFJ, if she has an ITIN & being married to a US citizen/ GreenCard holder ?    

Please consider telling more of the situation -- if it is of  no interest to the general users, you can always PM me  ( no Personally identifiable info , please ) and  one of us will help you through this.

pk

[dmertz · Accepted solution]

Filing a 2023 tax return is necessary to pay the self-employment tax on the $1,400 even if there is no taxable income after subtracting the standard deduction.

If you had no 2022 tax liability you will not have any underpayment penalty whether or not you pay estimated taxes as long as you pay the tax liability (perhaps just the SE tax) by April 15, 2024.

[Sammyhiro]

@pk My other source of income is from VA disability compensation. I had sustained some medical issues during active duty. So, this income is not taxable. My wife used to have a green card and social security number, however, I had to relinquish her green card because we were not going to return to the States at that time. I filed as Head of Household in 2021 because at the time my wife wasn't working or she was between jobs. It was a very difficult year. I was paying more than 60% of all costs. 

[Sammyhiro]

@dmertz So I am assuming when you mean self-employment tax you are referring to Social Security and Medicare tax? This means I should report my income of $1,400 on Schedule C (Form 1040), Profit or Loss From Business (Sole Proprietorship) by April 15, 2024.

[NCperson]

@Sammyhiro are you claiming the children on your tax return as you state you did so in 2021?

edit: never mind.  even if you claim them there is no CTC available since your income was less than $2500. 

[dmertz · Accepted solution]

Yes, your self-employment income is required to be reported on Schedule C and your self-employment tax covering Social Security and Medicare taxes is required to be determined on Schedule SE.  Because your net profit from self employment will be more than $433, your self-employment tax will be $400 or more requiring Schedule SE to be filed.

Assuming that you have no business expenses, the $1,400 of net profit will result in $198 of SE tax.  Even if you had a tax liability in 2022 that would eliminate that as a safe harbor, $198 is below the $1,000 current-year tax liability threshold where estimated tax payments would be required to avoid an underpayment penalty.