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I'm married and my wife and I work full-time. And I also started part-time consulting on the side (less than 10 hours per week or no hours during certain weeks). This is my first time doing consulting (1099) and I'm not really sure how to file my taxes or what I need to do as a part-time consultant to be tax compliant. I have some questions which are below -

  1. Do I need to file any forms before filing my taxes for example during the year? I know I will need to keep about 30-50% of my income (from consulting) aside for tax purposes. But someone told me that I need to file some forms before the beginning of each quarter. What are these forms and how should I be filing them (instructions)?

  2. I file my tax returns as a joint return with my wife. For the consulting gig taxes, could I file a return separately from the joint return? Or how would that filing work?

  3. Do I need to do anything special tax wise other than paying taxes on my own and any paperwork during the tax year?

  4. I haven't filled out any paperwork for the current month's work that I did? How can I remedy that?

Thanks

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    @littleadv 's answer below is perfect. If you need more help on the How to adjust W4, just ask. – JTP - Apologise to Monica May 31 '13 at 18:57
  • (1) Do I need to file any forms? In California, and many other parts of the country too, you would probably need a business license from your county or city and possibly a home business occupancy permit from city zoning. They'll find you from your tax return if you include a schedule C that has your home address as the business address. – Paul May 31 '13 at 20:23
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Do I need to file any forms before filing my taxes for example during the year? I know I will need to keep about 30-50% of my income (from consulting) aside for tax purposes. But someone told me that I need to file some forms before the beginning of each quarter. What are these forms and how should I be filing them (instructions)?

You're talking about the quarterly estimates (form 1040-ES). You don't have to, since you're a salaried employee you can adjust your withholding from the salary instead. Give your payroll/HR an updated form W4 that would account for the additional income.

I file my tax returns as a joint return with my wife. For the consulting gig taxes, could I file a return separately from the joint return? Or how would that filing work?

No. It will appear in the Schedule C of your joint return. You can either file as "Married filing Jointly" or "Married filing Separately" - but for the whole return, not specific portions of income.

Do I need to do anything special tax wise other than paying taxes on my own and any paperwork during the tax year?

I'd suggest a consultation with a licensed tax professional (EA or a CPA licensed in your state). That adviser will explain what and how you can deduct, how to manage your books, and what information IRS might ask you later if your returns are to be examined.

I haven't filled out any paperwork for the current month's work that I did? How can I remdedy for that?

Taxes are calculated annually, if you pay through salary withholding and end up paying enough at the end of the year, you're fine.

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  • I would prefer not to take the W-4 tax withholding route. How can I go about without doing that? – Gabbar May 31 '13 at 19:10
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    @Gabbar calculate and file 1040-ES every quarter. Changing W4 won't alert your employer, many people withhold extra to cover for capital gains or rental income, for example. If that's what's worrying you... – littleadv May 31 '13 at 19:16
  • @Gabbar by the way, I believe you've missed the deadline for the Q1, so W4 route would be better for you this year. IMHO, that is. – littleadv May 31 '13 at 19:18
  • Q1 I believe is January to March right? I didn't do any work during that time. I started working this month. Can I still file the 1040-ES for this quarter? – Gabbar May 31 '13 at 19:25
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    @Gabbar no, its yearly. If you haven't filed Q1 - you're already behind. Penalties are not significant, but it does add some overhead. I don't understand why would you want to mess with that if you have a much simpler way of solving this issue through your W4 adjustment – littleadv May 31 '13 at 19:42

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