Self employed

[Benedics14]

Hi,

So this year I changed from being a commission stylist (where I got a w-2 and taxes withheld) to a self employed booth rental stylist. I am aware that I will have to pay about a 25% tax, but I am hoping to divide that up and file quarterly so that it isn’t so much all at once. How can I go about doing that with TurboTax? I will also have a w-2 for part of the year from a part time job 

thank you  

[GeorgeDenseff]

There are various apps on the web that you can use to estimate your self-employment payments due.  TurboTax had one, but I see it is not active any more.

The advise I give anyone starting out working on their own is to purchase Intuit QuickBooks and TurboTax Bundle.  Once you set up QuickBooks, it takes information from your financial accounts and does all the calculations for you.

It will tell you when your estimated payment is due and how much to send.  You will get a voucher to mail with your check or directions to send it online.  Each quarter it makes adjustments so that you are not under or overpaying.  

You enter your expenses in categories and mark the ones you need for taxes.  When it is time to file you taxes it pulls the information from the previous year into the correct places in TurboTax.   Preparing your self-employment tax return is as simple as pushing the button to bring the information from QuickBooks to TurboTax Self Employed.

You, of course, can decide to do your bookkeeping in whatever way is best for you.  
Self-Employed Individuals Tax Center | Internal Revenue Service (irs.gov)

[Akil C]

Hi Benedics14!

Great question! And fantastic job of thinking ahead about how being self-employed will impact your tax return next year!

25% is a good ball-park estimate because it includes not only any income tax you will pay on your self-employed earnings but also the FICA (Medicare & Social Security taxes), which amounts to roughly 15% of your NET earnings (business income minus business expenses).  To get a more accurate estimate, I recommend using the TurboTax Estimated Tax Calculator where you can input detailed information about any other items that may impact your estimated tax calculation. You may simply log into your account and click on the Live Help TurboTax guy in the lower right-hand corner to get assistance with one of our Wxperts to get you started. 

Quarterly payments are due 4/15, 6/15, 9/15 of 2021, and 1/18/22 this year.   So if you've missed the first two payments, you could divide your estimated income tax on your booth rental net earnings over the final two payment deadlines 9/15/21 and 1/18/22.  

You can make payments directly to the IRS on the IRS website.  Or if you use the TurboTax Estimated Tax Calculator, it will generate 1040-ES (estimated tax payment vouchers) for you that you may use to mail into the IRS.

For everything you need to know about Estimated Tax Payments, please visit this TurboTax link.

Thanks,

Akil C. 

[VolvoGirl]

You will need to keep good records.  You may get a 1099NEC at the end of the year if someone pays you more than $600 but you need to report all your income no matter how small.  You might want to use Quicken or QuickBooks to keep track of your income and expenses.

There is also QuickBooks Self Employment bundle you can check out which includes one Turbo Tax Online Self Employed  return....

http://quickbooks.intuit.com/self-employed

When you are self employed you are in business for yourself and the person or company that pays you is your customer or client.

To report your self employment income you will fill out schedule C in your personal 1040 tax return and pay SE self employment Tax.  You will need to use the Online Self Employed version or any Desktop program but the Desktop Home & Business version will have the most help.

Here is some IRS reading material……

IRS information on Self Employment

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Self-Employed-Individuals-Tax-Center

Pulication 334, Tax Guide for Small Business

http://www.irs.gov/pub/irs-pdf/p334.pdf

Publication 535 Business Expenses

http://www.irs.gov/pub/irs-pdf/p535.pdf

You pay Self Employment tax on $400 or more of net profit from self-employment in addition to any regular income tax.  You pay 15.3% SE tax on 92.35% of your Net Profit greater than $400.  The 15.3% self employed SE Tax is to pay both the employer part and employee part of Social Security and Medicare.  So you get social security credit for it when you retire.  

PAYING ESTIMATES

You may need to send in quarterly estimated payments to cover any self employment tax and increase in income.

You must make quarterly estimated tax payments for the current tax year if both of the following apply:

- 1. You expect to owe at least $1,000 in tax for the current tax year, after subtracting your withholding and credits.

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

    90% of the tax to be shown on your current year’s tax return, or

  100% of the tax shown on your prior year’s tax return. (Your prior year tax return must cover all 12 months).

Turbo Tax will calculate the 1040ES estimated payments

https://ttlc.intuit.com/community/tax-payments/help/can-turbotax-calculate-next-year-s-federal-estim...

How to make the Estimated payments

https://ttlc.intuit.com/community/tax-payments/help/how-do-i-make-estimated-tax-payments/00/25875

Here are the blank Estimates and instructions…..

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

To prepare estimates for next year you start with your current return, but be careful not to change anything.  For Online returns, if you can't get back into your return, Click on Add a State to let you back into your retun.

You can just type W4 in the search box at the top of your return , click on Find. Then Click on Jump To and it will take you to the estimated tax payments section. Say no to changing your W-4 and the next screen will start the estimated taxes section.

Or Go to….

Federal Taxes or Personal (Desktop H&B)

Other Tax Situations

Other Tax Forms

Form W-4 and Estimated Taxes - Click the Start or Update button

The 1040ES quarterly estimates are due April 15, 2021, June 15, Sept 15 and Jan 18, 2022.   Your state will also have their own estimate forms.

Or you can pay directly on the IRS website https://www.irs.gov/payments

Be sure to pick the right kind of payment and year.....2021 Estimate