I did consulting work in addition to my regular job in Jan. I got a check that I believe I need to pay estimated tax on. How to I calculate what I owe and how do I pay?

[bouchon12]

Hello, I have a regular full time salaried job but I also did some consulting in January. I received a check for that work but it did not have any tax withheld. I was told that I would receive a 1099 in January 2019. However, I believe that I need to pay estimated tax on the payment to avoid a huge tax bill in 2019. Is this correct? If so, how do I calculate what I owe on my consulting payment and how to I pay it? Thanks!

[JBH0 · Accepted solution]

Yes if you did independent contract work it will be taxable.  Next year you will get a 1099  and have to fill out a schedule c that will compute income tax and self employment tax. 

You can handle the additional taxes by doing an estimated tax payment or by increase your federal withholding with your employer.  

There is an IRS website that very easily allows you do submit estimated tax payments. Alternatively if you expect a 2017 refund you can apply it towards your Q1 estimated taxes. 

How much additional tax you owe on your side business depends on a lot of different variables.  If I had to guess you could estimate your additional tax burden as somewhere between 20% and 35% of your gross income, but realize that is a complete guess/“swag”.  

[JBH0]

Alternatively if you wanted to save it in a retirement account you may be able to set up a self employment retirement account like a solo 401k or a SEP IRA. Whether or not you want to do this depends on a lot of factors and whether or not you are already taking advantage of existing tax deferred 401k opportunities available to you through you employer and individual IRAs or Roths.