I'm doing some part-time contract work. I filled out a W-9 for my client and am paid directly.
I believe it's my responsibility to send estimated tax prepayments to the IRS every quarter. But I don't know the specifics. Which forms do I need to fill out? What, specifically, do I need to do.
I'm fairly clueless on tax issues. I'm used to doing regular W-2 employee work, and that's idiot proof. I've googled for tips on this (I'm sure it's a common scenario), but I can't find a clear explanation. Thanks!
Form 1040ES and the similar state tax for to make estimated payments/
To simplify things, take your gross receipts and subtract your expenses incured in generating those receipts. Compute the self-employment tax on that net amount, and the income tax on the net profits AND all your other regular income - less your standard or itemized deductions and personal expemptions.
This may be worth your time and the few bucks to hire a CPA or EA for tax advise related to this, as well as your business in general. They'll help you more than you know.
Your post indicates this is *additional * income for you and you are still getting W-2 wages. If this is the casse you don't have to make any instalment estimates if your withholding this year will be at least as much as last year's total tax. (or 110% of last year's tax if last year's AGI was over $150K). You can increase your withholding any time to meet this "last year's tax safe harbor"., even one large extra withholding in December. If you can't meet this minimum requirement with withholding from your wages you will have to pay estimates. As mentioned by others, you have missed the first installment so you will either owe a late payment penalty on the first installment or you will be governed by the Annualized income rules in IRS form 2210 and its Schedule AI.
If you can't adjust withholding to eliminate the need for estimate installments then calculating the Annualized Income Method allows you to pay the least amount of installments to avoid a penalty. Whether you moonlighted in the first quarter or not, the AI Method may eliminate any penalty even thouigh you missed the due date for paying the first installment.. or possibly even the second installment. It depends on all your other income and deductions, annualized.
Get IRS Publication 505, and form 1040-ES and form 2210 and its Schedule AI and Instructions for further information on this topic. The web has volumnious information on paying estimates and you can even find a *2210 calculator* there to do all the computations for you.
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