This is my first year self-employed (gig worker.) Do I need to sign up for quarterly tax payments now?

[hyprior]

I use an app that determines my taxes owed so far, after deductions. I'm at 350, so I'll be at the 400 lower limit soon. However, I don't know if I'm going to do gig work the rest of the year or how much income I'll get from it (I do it part time) so I'm unsure about quarterly taxes.

Do I wait to see how much in taxes I pay next year, from this tax year, to determine the amount I need to do for quarterly payments? Or do I guess a random number for my estimated income this year and start payments now? If the latter, I'm worried my payments will be too high if I end up only doing this for a month or two more.

This is my only income, but I'm married filing jointly.

[Opus 17]

You must file a self-employed return if your net income after expenses is more than $400, that's not the threshold for making estimated payments.  

You will owe a penalty for underpayment or late payment if you don't pay during the year, even if you pay in full when you file, unless you meet one of these three penalty exceptions:

1. the tax you owe when you file is less than $1000

2. the amount you paid into the system is more than 90% of your tax bill

3. the amount you paid into the system is more than 100% of last year's tax bill.  (Your last year's tax is not your refund or tax owed, it is your tax liability.  For example, if you had $2000 of W-2 withholding and got a $500 refund, your tax liability was $1500.)

If you have never worked before, and paid no tax last year, then you already have paid 100% of what you owed last year (because that was nothing).  If you have paid tax in the past, then you probably need to make some estimated payments.  Your tax return will calculate your actual tax owed from all your income, deductions and credits.  If you over-pay your estimate, you will get the difference back as a tax refund.  You can make estimated payments online at www.irs.gov/payments

[hyprior]

I expect to file a self employed return next year as I will no doubt cross that $400 threshold by then.

I don't understand how to determine the amount I need to pay quarterly. I keep records, and right now I estimate that between when I started in June and today I owe about 300 in tax. Is that what I would submit for a quarterly payment with the idea that next quarter may be less or more, or do I need to assume I'll owe 1200 (300x4 quarters) so just pay 300 each quarter?

I worked full time last year at a company and paid taxes the "normal way." 

Also, can I file to do quarterly payments electronically? I've seen the paper form and it's extremely confusing. 

[VolvoGirl]

You can use Turbo Tax to help prepare them.  But I don't think the Free Edition has the estimates.  

You send in quarterly estimated payments to cover the income tax and self employment tax (FICA). The Self Employment tax (Scheduled SE) is automatically generated if a person has $400 or more of net profit from self-employment. You pay 15.3% SE tax on 92.35% of your Net Profit (If it is 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.

How to make the Estimated payments
https://ttlc.intuit.com/community/tax-payments/help/how-do-i-make-estimated-tax-payments/00/25875

Here are the blank Estimates and instructions…..
https://www.irs.gov/pub/irs-pdf/f1040es.pdf

To prepare estimates for next year you need to be in your current return. If you can't get your return open, Try this, you can sign back onto your account, click on Add a State. This should get you back into your return. Be very careful not to change anything in your actual return.

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 (Home&Business version)
Other Tax Situations
Other Tax Forms
Form W-4 and Estimated Taxes - Click the Start or Update button

Say No to W4. When you get to the W4 and Estimated Taxes section, say you want to adjust your income to go though all the screens.

[VolvoGirl]

Here is some info on self employment......

To report your self employment income you will fill out schedule C in your personal 1040 tax return and pay SE self employment Tax. You can enter Self Employment Income into Online Deluxe or Premier but if you have any expenses you will have to upgrade to the Self Employed version. Or any of the Desktop programs. But you will get the most help in the Home & Business version.

You might want to use Quicken or QuickBooks to keep tract of your income and expenses. There is one called QBSE QuickBooks Self Employed that works with Online Turbo Tax and will give you a free online tax return next year.
https://quickbooks.intuit.com/self-employed

You need to report all your income even if you don't get a 1099NEC or 1099Misc. You use your own records. You are considered self employed and have to fill out a schedule C for business income. You use your own name, address and ssn or business name and EIN if you have one. You should say you use the Cash Accounting Method and all income is At Risk.

Self Employment tax (Scheduled SE) is automatically generated if a person has $400 or more of net profit from self-employment. You pay 15.3% 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 1040. The SE tax is already included in your tax due or reduced your refund. The SE tax is in addition to your regular income tax on the net profit.

Here is some IRS reading material……
IRS information on Self Employment
https://www.irs.gov/businesses/small-businesses-self-employed/self-employed-individuals-tax-center

1040 Schedule C Instructions
https://www.irs.gov/pub/irs-pdf/i1040sc.pdf

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

[Opus 17]

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@hyprior wrote:

I expect to file a self employed return next year as I will no doubt cross that $400 threshold by then.

I don't understand how to determine the amount I need to pay quarterly. I keep records, and right now I estimate that between when I started in June and today I owe about 300 in tax. Is that what I would submit for a quarterly payment with the idea that next quarter may be less or more, or do I need to assume I'll owe 1200 (300x4 quarters) so just pay 300 each quarter?

I worked full time last year at a company and paid taxes the "normal way." 

Also, can I file to do quarterly payments electronically? I've seen the paper form and it's extremely confusing. 

---

Turbotax is not designed to prepare the estimated taxes for you, only prepare the return at the end of the year.  But it sounds like your app is doing that for you?  Quickbooks and Mint are other applications that will track business expenses and help estimate your profit and taxes.  

Your self-employment taxes will be 15%-37% of your net earnings after expenses.  15% for self-employment tax (the SE version of social security and medicare withholding) and 0-22% of income tax, depending on your other income.  If you are single and have no other income, your first $12,550 is not subject to income tax since that is the standard deduction, and 10% or 12% after that.  These thresholds will vary depending on your marital status, spouse's income, and dependents.  All your earnings are subject to the 15% SE tax.

If your app is suggesting you owe $400 in tax, that means you only have a net profit after expenses of $2600? You might need better-paying gigs!

You can make electronic payments at www.irs.gov/payments.  Select "2021 estimated taxes" as the reason from the drop-down menu (or it might say "2021 form 1040-ES").  You don't mail in a paper form if you pay online, and you don't need to use the paper form to calculate the estimate if you have calculated it another way.  

[hyprior]

I worked a "standard" job from January until mid-April, made about 13k, all of that was taxed accordingly. I've been doing gigs for about a month now, maybe month and a half, and according to my records I'm at:

$1,751.99 income, $554.26 deductions (mostly milage), $359.32 taxes - $1,197.73 profit. Taxes, man. 

So I can just submit the $359.32 online (or whatever the total ends up being before the quarter deadline) and don't need to file anything to indicate intent to do quarterly payments?