Gig work taxes

[Outs01]

Hi,

I work a regular full time job with a W2 and also do gig work driving for Uber, Doordash, etc.  I understand I have to pay estimated taxes quarterly to the IRS, but do these payments include state taxes or do I need to pay state taxes separately?  Also, my wife has a full time W2 job and we file jointly, but only I do gig work. Do I file estimated taxes as married filing separately or do I need to file as I do for regular annual taxes?

Thanks.

[Vanessa A · Accepted solution]

You need to pay state taxes separately.  The IRS and the state do not share the money.  They are separate entities, so if you do not pay separately, the one that does not get the money will penalize you.

You only need to pay the quarterly taxes on the amount you earn for your gig work.  However, to determine your tax rate, you will need to consider her income and your other income as well.

Depending on how you want to do it and how much you make with your gig work, you can also change your W-4 to increase the amount you have withheld to cover the extra income.  This would allow you to not have to pay the quarterly payments as long as you do make sure you are having enough extra withheld.

What is the self-employment tax?

[Outs01]

Thanks for the info Vanessa.  I should have mentioned that my wife and I work in NY, but we reside in NJ.  I also only do gig work in NJ.  In this case, do I still need to consider all of our collective income for both states when calculating for federal and for state?

[Vanessa A]

For federal yes, you still need to consider ALL of your collective income.

For NY, you would only consider the income you earn in NY since you are a non-resident.  You would not need to consider the income you earn only in NJ on your NY return.

For NJ, you will need to consider all of your income the same as you do your federal.  However, for NJ, you would then also consider the tax credit that you would get on your return for taxes paid to NY on your W-2 income.  You will not have a credit for your gig work on your NJ return, so you will need to be sure to pay taxes on that to NJ.  

[Outs01]

Thanks Vanessa!  

So I guess my next question would be, what's the best way to calculate my NJ tax credit?  Do I look my last W2 for reference, as these are estimated taxes?  I'm getting the feeling I may be in over my head trying to get this done on my own!

[Vanessa A]

No.  You need to file your NY return first.  Then when you file your NY non-resident return, your credit will be the amount that NY charges you for taxes.  

After you complete the NY return, go to your NJ return and when asked about credits, you will enter the amount of your NY tax liability here. This may not be the same as the amount you had withheld.  So be sure to use the amount from your tax return. 

As you go through, just be sure you read each question carefully and then answer it.  TurboTax pretty much does the work for you.  It is like sitting across the desk from someone just you have to read the questions instead of having someone ask them.

If you get stuck you have the option in the upper corner to select help.  You can choose live help where someone can see your screen and just answer the questions you have, you can also have someone prepare the return for you through the upgrade questions or we are also here to answer your questions for free.  We just can't see your screen in the community so if you get stuck, a screenshot with your question can help just be sure not to post any personal ID information such as your name, address, ssn or email address. 

[Outs01]

Will do.  Thank you!