Tax question for the self employed.

[IHateMyJob2004]

No, this is not a tax question for FY2007. Anyways ....

My wife started a business about a month ago. She's made about $1K so far. And I need to finally figure out what I need to do taxes wise. My intent right now is just to have more taxes withheld from my paycheck than would otherwise be needed. Seeing how estimated taxes are due tomorrow though I want to make sure.

1) Can I just withhold more from my paycheck or are estimated taxes required to be paid quarterly?

2) My big question is, how is social security, Medicare and all that other stuff taken care of if you are self employed?

Thanks!

 

[Ns1]

1. Yeah but I doubt it'd wipe our your wife's estimated tax liability
2. You pay it on your 1040 or on your ES payments. Kiss 15.3% of your wife's income goodbye. At least you get to claim it as a deduction to get to agi...
3. Time to get a good accountant

 

[MrPickins]

As long as you're withholding enough to cover your joint taxes, you shouldn't need to pay quarterly. (I had the same thing going with my wife and my self-employment).

And as for #2, I think that the self employment tax covers it all. That's one reason it's so high (mine was almost 25%).

 

[SearchMaster]

You do have to file the ES (quarterly) estimates. However, if you don't underpay your taxes for the year, it's not a given that you'll be audited/fined.

If you file the 1040ES, question #2 will become clear . You'll basically pay 15.3% (your portion + employer's portion) of the net income for SS/Medicare.

 

[IHateMyJob2004]

(1)
From the below link, I think I am OK.... "You generally have to make estimated tax payments if you expect to owe taxes, including self-employment tax, of $1,000 or more when you file your return."
http://www.irs.gov/businesses/...e/0,,id=115043,00.html

Assuming this works for jointly filing, that means as long as I expect to owe less than $1,000 jointly we don't need to file estimated taxes.

 

[IHateMyJob2004]

Well, it looks like estimated taxes are going to be done. Yayyyyyy .....

At least it doesn't seem like a big headache. I can file online and avoid late fees.

Next stop, my wife who is currently watching 2 infants, one 2 year old, a 3 year old and a 7 year old. I tried to warn her, but no .....

 

[IHateMyJob2004]

Originally posted by: MrPickins
As long as you're withholding enough to cover your joint taxes, you shouldn't need to pay quarterly. (I had the same thing going with my wife and my self-employment).

And as for #2, I think that the self employment tax covers it all. That's one reason it's so high (mine was almost 25%).

(1)
So, you've been through this ... cool. So, I figure that my income will cover 70% of our taxes. I'll just change my W-4 to withhold a bit more.

So, I guess where I am going with this, is when I fill out my W-4 and say to hold more for taxes, that also means more will be held for Medicare, Social Security, etc. Is this correct?

So, when it comes to the end of the tax season, I just do my taxes as normal and everything works out? The self-employment section of my end of year tax forms will make sure it all works out?

---
You can count on two things in life. Death and Taxes. Why is death the easy one?

 

[MrPickins]

The first year I was self employed I didn't file quarterly, thinking my wife's withholdings would cover it. It didn't, and I had to pay a small penalty. The next year she increased withholdings, and we ended up with $100 refund.

I did my research in between the two returns and found the same line you did:
"You generally have to make estimated tax payments if you expect to owe taxes, including self-employment tax, of $1,000 or more when you file your return."

I took that to mean that if I didn't expect to owe taxes, then I had no need to file quarterly. I have filed the past two two returns (receiving money back on each) for the past two years, and so far have had no complaints from the IRS.

I'm no tax professional, however. All I can offer is my story.

As for the W-4, I'm pretty sure my wife set a dollar figure to withhold above what was already being taken out.

 

[IHateMyJob2004]

Started a slightly different thread:
http://forums.anandtech.com/me...id=38&threadid=2177651

Ya, I think the estimated taxes are in fact required in order to pay for Medicare and Social Security.

I HATE THE US TAX SYSTEM .... IT SUCKS!

 

[IHateMyJob2004]

Owwww, my head:

I still don't get it. Why the hell can't the government just come out and say what to do?

http://www.socialsecurity.gov/pubs/10022.html

 

[IHateMyJob2004]

OK, i think I got it.

If you pay estimated taxes during the year, you will end up paying into Medicare and Social Security.

If not, you will end up paying it when you file your taxes at the end of the year, while you do the self employment section.

So, either way, you do end up paying into SS and Medicare. The other half of all this is just that you need to make sureyou get your income taxes paid. What a PITA!

 

[MrPickins]

Originally posted by: IHateMyJob2004
OK, i think I got it.

If you pay estimated taxes during the year, you will end up paying into Medicare and Social Security.

If not, you will end up paying it when you file your taxes at the end of the year, while you do the self employment section.

So, either way, you do end up paying into SS and Medicare. The other half of all this is just that you need to make sureyou get your income taxes paid. What a PITA!

Sounds like you've got it.

From my understanding, the "self employment tax" covers SS and Medicare.

 

[Dirigible]

Self-employment tax and the estimated taxes are a huge PITA, especially when the self-employment income has huge swings. What the heck to do when the estimated payment (based on prior year's income) is three times the actual revenue for the past quarter? Arg. Whatever.

 

[JulesMaximus]

It's called self employment tax...and it's fucking bullshit. We get ass raped by this every year. However, if you make over $97k annually (which she does not) the rate drops substantially. :|

She'll need to make estimated payments during the year or pay penalties for underpayment when you do your taxes.

 

[IHateMyJob2004]

I started doing the estimated taxes worksheet and it's a PITA by itself. My wife is making like $25K (a guess). If these are "estimated taxes" why can't there be a simple way to estimate it?

I'm going to bed. This sucks. Tommorrow I have to fill out the form and file online via credit card. F you uncle sam!

 

[Greenman]

Welcome to the world of the self employed. Another nice little piece of information for you; Returns that have a schedule C attached (profit or loss from a business) are three times more likely to be audited that those without. Isn't it great to be the "back bone of America".

 

[Miramonti]

The glorious benefits of being a daytrader...no self employment tax (sometimes no income either, but that's another story.)

 

[SearchMaster]

Originally posted by: JulesMaximus
It's called self employment tax...and it's fucking bullshit. We get ass raped by this every year. However, if you make over $97k annually (which she does not) the rate drops substantially. :|

She'll need to make estimated payments during the year or pay penalties for underpayment when you do your taxes.

It just drops because of the FICA limit, correct? That's just 2.9% (at least it was 15+ years ago). Of course the FICA limit was on ~$68K then too.

 

[IHateMyJob2004]

I HATE THIS STUPID ESTIMATED TAX FORM CRAP. It's telling me that I should pay 1/4 of what I am already paying from my full tiem employment to cover my wifes additional income?

THIS FORM SUCKS!

I HATE IT

 

[EagleKeeper]

Originally posted by: IHateMyJob2004
I HATE THIS STUPID ESTIMATED TAX FORM CRAP. It's telling me that I should pay 1/4 of what I am already paying from my full tiem employment to cover my wifes additional income?

THIS FORM SUCKS!

I HATE IT

So do not file it.

 

[Ns1]

Originally posted by: IHateMyJob2004
I HATE THIS STUPID ESTIMATED TAX FORM CRAP. It's telling me that I should pay 1/4 of what I am already paying from my full tiem employment to cover my wifes additional income?

THIS FORM SUCKS!

I HATE IT

Get a cpa. Have him make your ES coupons for you.

No stress for you. Problem solved.



Are all the hours that you put into this worth the 2-400 the CPA would've cost you?

 

[IHateMyJob2004]

Originally posted by: EagleKeeper

Originally posted by: IHateMyJob2004
I HATE THIS STUPID ESTIMATED TAX FORM CRAP. It's telling me that I should pay 1/4 of what I am already paying from my full tiem employment to cover my wifes additional income?

THIS FORM SUCKS!

I HATE IT

So do not file it.

I'm at thew point right now that I will not pay estiamted taxes this year. It has me this pissed. It's called ESTUIAMTED TAXES. Why the hell can't it be simple and in english?

 

[IHateMyJob2004]

Wow, based on the Turbo Tax interview, I don't have to worry about estimated taxes next year. Thank god. It is surprising because my wife is going to make a good chunk of change this year. An extra 30-40% of family income and we don't need to pay estimated taxes !?!?!?!?

Makes no sense to me, but I will pleed ignorance.

 

[goog40]

I believe if the amount being withheld from your paychecks is enough to match last year's tax liabilities, you should be able to get away with not making any estimated tax payments, even if your wife makes $500k from her business this year (which would make her slightly below the ATOT median, sorry). If not, you just need to make enough of an estimated payment to match last year's taxes.