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Posted by cambridge on September 3, 2007, 10:14 am
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I am filing estimated taxes for the first time as an
independent contractor. I understand the concept of simply
estimating taxes based on my last year's taxes paid. I
don't understand how to fill out the 1040-ES form if I'm
using this method. The worksheet requires AGI, exemptions,
etc. It doesn't seem to allow me to simply indicated taxes
paid in 2006 and taxes owed for 2007. Should I just skip
everything until line 14?
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<< that may be imposed upon the taxpayer. >>
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<< The Charter and the Guidelines for submitting posts >>
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Posted by Bill on September 3, 2007, 10:13 pm
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cambridgeways@hotmail.com posted:
> I am filing estimated taxes for the first time as
> an independent contractor. I understand the
> concept of simply estimating taxes based on
> my last year's taxes paid. I don't understand
> how to fill out the 1040-ES form if I'm using
> this method. The worksheet requires AGI,
> exemptions, etc. It doesn't seem to allow me
> to simply indicated taxes paid in 2006 and
> taxes owed for 2007. Should I just skip
> everything until line 14?
Bingo! But remember to add about 15% of your income, which
will be assessed as a _below the line_ tax amount, since
your employer is no longer withholding and paying the .0765
share of FICA and Medicare taxes.
That isn't required to protect you from a penalty, but is
wise in order to avoid a large additional tax due problem
for you, next year.
Bill
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by Bob Sandler on September 3, 2007, 10:14 pm
Please log in for more thread options > I am filing estimated taxes for the first time as an
> independent contractor. I understand the concept of simply
> estimating taxes based on my last year's taxes paid. I
> don't understand how to fill out the 1040-ES form if I'm
> using this method. The worksheet requires AGI, exemptions,
> etc. It doesn't seem to allow me to simply indicated taxes
> paid in 2006 and taxes owed for 2007. Should I just skip
> everything until line 14?
Why not skip the whole worksheet? The worksheet is just for
your own use, to help you calculate your tax liability. You
don't send the worksheet to the IRS. You don't have to use
it if you don't like the way it works. If you understand the
concepts, do your own calculation of how much to pay and
fill in the result on the voucher. The voucher is the only
thing you send to the IRS, and it simply says, in effect,
"here's how much I'm paying this quarter." You don't have to
show how you arrived at the amount.
Bob Sandler
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by John H. Fisher on September 3, 2007, 10:14 pm
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> I am filing estimated taxes for the first time as an
> independent contractor. I understand the concept of simply
> estimating taxes based on my last year's taxes paid. I
> don't understand how to fill out the 1040-ES form if I'm
> using this method. The worksheet requires AGI, exemptions,
> etc. It doesn't seem to allow me to simply indicated taxes
> paid in 2006 and taxes owed for 2007. Should I just skip
> everything until line 14?
The basic requirement is that you have paid in as much as
was your last year's tax (100% of that tax) in order to
avoid penalty of underpayment. This is true unless your
adjusted gross income for the prior year exceeded $150,000
($75,000 if your filing status for 2007 is married filing
separately). In that case you would substitute 110% for
100% quoted above.
The simplest way is to divide last year's bottom line tax,
divide it by 4, and make 4 equal payments to cover your
liability. If you are going to make less than the prior
year, you can make adjustments to the payments you make. As
long as you have paid in 90% of what will be your current
year's tax, no penalty will be applied.
http://www.irs.gov/pub/irs-pdf/f1040es.pdf
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by rick++ on September 12, 2007, 10:05 pm
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> I don't understand how to fill out the 1040-ES form if I'm
> using this method. The worksheet requires AGI, exemptions,
> etc. It doesn't seem to allow me to simply indicated taxes
> paid in 2006 and taxes owed for 2007.
The important form is the [not required] penalty form 2210.
That tells you if you havent paid enough taxes on time. The
IRS and most tax softwares automatically calculate i2210 for
you and tell you if you have a penalty.
2210 has two ways of calculating the penalty, of which the
IRS uses equal installments. The second method of
annualized income is better for me personally because most
of my variable income is in the final quarter. You have to
do it both ways to find out whats best for you.
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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