0

I was looking to get some help with my federal quarterly estimates this September.

  • My W2 income is 36k/year
  • My 1099 income (started 2 months ago) is around $1000/month

How do I calculate my quarterly estimated payment for this coming quarter? I've searched online but I'm still confused about the income tax part of the equation, mainly because I have the W2 income on the side and I'm not sure how that factors in.

Any help would be appreciated.

2

By the end of the tax year the IRS expects you to either overpay/over withhold so you get a refund, or they want you to be reasonably close so that you will only have to send them a small amount of money.

For most workers the means to pre-pay those taxes are through payroll withholding based on their income and the information they put on their W-4 form.

When they have other income, not from being an employee they frequently have to file estimated taxes.

  • My W2 income is 36k/year
  • My 1099 income (started 2 months ago) is around $1000/month

Because you are just starting you have an opportunity to use the safe harbor provisions regarding estimated taxes:

General Rule

In most cases, you must pay estimated tax for 2018 if both of the following apply.

  1. You expect to owe at least $1,000 in tax for 2018, after subtracting your withholding and refundable credits.

  2. You expect your withholding and refundable credits to be less than the smaller of:

    • 90% of the tax to be shown on your 2018 tax return, or

    • 100% of the tax shown on your 2017 tax return. Your 2017 tax return must cover all 12 months.

So if you make sure that 100% of what you should have paid in 2017, is withheld from your main job, then you can avoid having to file the estimated taxes forms. Note if your income was significantly higher the standard is not 100% but 110%. The 90% rule seems harder to calculate becasue it takes knowing how much you will make before you make it.

To make sure you make that 100% goal you can change the number of allowances by adjusting numbers of your W-4. You can also use the W-4 to tell your employer to withhold an extra fixed amount on each paycheck, to make sure you make the 100% goal.

Note regarding the 110% rule from the same IRS document:

Higher Income Taxpayers

If your AGI for 2017 was more than $150,000 ($75,000 if your filing status for 2018 is married filing a separate return), substitute 110% for 100% in (2b) under General Rule , later.

For 2017, AGI is the amount shown on Form 1040, line 37; Form 1040A, line 21; and Form 1040EZ, line 4.


method to use the safe harbor so you can avoid the estimated tax forms:

  • step 1 find the tax form from this past April;
  • step 2 find what your total tax was (the IRS says it is line 63 of form 1040);
  • step 3 look at your most recent pay stub and find your total federal tax withheld this year so far;
  • step 4 calculate how much will be withheld on the remaining pay checks if you don't change your w-4.
  • step 5 add step 3 and step 4.
  • step 6 Evaluate:
    • If this number is less than the number in step 2, then decrease allowances to have more withheld or keep the number of allowances the same and ask for additional money to be withheld (line 6 of the W-4 form). I find the extra withholding easier to calculate.
    • if the numbers are close you might still make an adjustment to make sure you make the safe harbor.
    • if the number in step 5 is above the one in step 2 then you don't have to make an adjustment to the W-4.

even with this you may still owe money to the IRS in the spring, it just avoids getting hit with a penalty for under-withholding.

  • Thanks so much for your answer. How does the IRS define "significantly higher"? I made a little under 22k in 2017 because that was the year I started working (I started in May) – jgozal Sep 12 '18 at 12:21
  • 1
    added a note at the end. Short answer 150K in income for 2017 – mhoran_psprep Sep 12 '18 at 12:31
  • got it! so in conclusion, I can postpone paying my 2018 taxes on my 1099 income until April, 2019 correct? – jgozal Sep 12 '18 at 12:36
  • 1
    If you make the safe harbor numbers. With the tax law changes this year it is possible that a person could have the same income, and the same exemptions on a w-4 and miss the safe harbor. – mhoran_psprep Sep 12 '18 at 12:39
  • 1
    Only you can answer that question. You need to compare what has been withheld so far by looking at your paystubs and compare it to what was was on your 2017 tax forms. – mhoran_psprep Sep 12 '18 at 18:32
0

If your employer is withholding taxes then you don't have to deal with estimated taxes. If not, then you can read about estimated taxes and print the appropriate form here:

https://www.irs.gov/pub/irs-pdf/f1040es.pdf

  • Well my employer is withholding them for my W2 income. But I imagine that income affects my overall tax bracket when calculating my estimated payments for my 1099 income right? – jgozal Sep 11 '18 at 22:54

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.