Self Employed AND working full time W2: can I use form 2210 to have all of my W2 withheld taxes cover my self employment income?

[lauracton]

I work a full time W2 job with an income of around $70k annually. I now also have a "side gig", a sole proprietor business for event photography and social media management (basically freelance work). I expect to earn $10k this year from this side gig business. In case it's relevant, last year was the first year this side gig existed and for that year (2023) it earned $4k. I paid no quarterly taxes that year because of it being it's first year in existence. 

I know I need to pay quarterly taxes, but after an insane year of expenses (life) I haven't submitted payments. I have questions about filling out a form 2210 to essentially tell the IRS that my withholdings from my W2 job should also be considered as covering or going towards what I will owe on this side business. My total witholding for my W2 is WAY more than 100% of "last years tax amount" for the side business, which I've read is relevant and matters. 

If this is all hogwash and not doable, I would instead make a payment before the Sept quarterly deadline and just hope for the best (hope the penalty I'll pay is not a lot, if any). 

Thank you for taking the time to look at my nuanced situation. Can you please discuss and review the topic of 2210 with me with regards to withholding in a situation like mine (full time W2 and side gig)? 

[Bsch4477]

Forget 2210 which is used to get out of a penalty when you have already under withheld. You can either increase your W-2 withholding or pay quarterly self employment tax. 

[lauracton]

Easy peasy! I'll definitely just calculate a payment and make one by or before the Sept deadline. I also might discuss the topic of increasing my withholding with my boss, but I know as of now I'm opting for A LOT of taxes to be taken out (something I opted for at the start of my job, wanted the biggest refund I could get lol). 

My research says that to calculate my quarterly amounts, I take my last year's total tax due for my business and divide that by 4 (for 4 payments). Can you speak to that? Is this the correct way to calculate the amount I should submit (I'd pay 3/4 of my quarterly payments all at once in Sept). Thanks!

edit: if you have any advice about submitting quarterly taxes for the state of california as well, I'd love to hear it. I've read that some states require it, some don't, and my research seems to indicate that California requires me to pay "something" for quarterly taxes as well for this business. 

[Bsch4477]

That works. Remember that on your self employment income you pay two different taxes. One is income tax at your marginal tax rate and the other is self employment tax at 15.3%. 

[lauracton]

Thank you for this info and reminder!

Do you happen to know anything about California state filing, and how quarterly taxes will work for state filing as well? lol. That's next on the list for me to research (seems like California is a state that requires quarterly payments in my case). 

[Bsch4477]

California works the same way. 

https://www.ftb.ca.gov/pay/estimated-tax-payments.html

[claywallace]

Based on your facts of $10K in net income (if this is gross, keep in mind to deduct expenses from this number), the SE (social security and medicare) tax would be roughly 15.3% x 10,000 = 1,530.  It's approximate because you get a deduction off the gross of 7.65%.  Then you must calculate your income tax.  If you're filing single, it appears you're in the 22% tax bracket and your total for tax on self-employed earnings would be $2,200 plus $1,530 = $3,730.  

If you withhold extra tax from your W2 job, you would need to cover $3,730 /4 for the remaining months left in the year.  That would be $932.50 in extra federal tax per month.  You can see why it might make sense to mail in or electronically deposit one or two ES payments.  

The IRS has some form 2210 penalty avoidance safe harbors.  If you pay in at least 100% of the prior year's tax liability (110% if you make over $150K), or 90% of your current year liability, you will not owe a penalty.  This is what form 2210 is actual for - to calculate any penalty.  

Other factors can come in to play such as deductions from your self employment income, tax credits or other passive income or if you're filing married join.  However, it would be advised to make the remaining ES payments for September and January of 2025.  You may also need to pay state estimates.  Some states penalize you for not paying quarterly just like the IRS and some states do not.  You will need to check with the revenue department of your state. 

Cheers