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Tax Question- Working a Side Hustle that 1099s You, No Withholding
Posted on 5/25/21 at 3:48 pm
Posted on 5/25/21 at 3:48 pm
So I might start working a little side job a few days a month, making maybe an additional $1800-2400 a month. I already owe taxes every year, this year $3k-ish. Will I need to prepay anything federally if I start this side job? I already owed a small penalty this year, I don't want that to increase. I've also increased withholding (again) in my main job.
Thanks.
Thanks.
4
Posted on 5/25/21 at 3:56 pm to slacker130
You'll have to make quarterly estimated payments for self-employment tax as well as income tax.
Posted on 5/25/21 at 3:58 pm to slacker130
If your side hustle brings in $20-30k per year that’s awesome. You will have have to prepay, or actually just pay on time (prepay is a misnomer, you pay on time quarterly to avoid penalties and interest), if it’s not withheld and you owe on taxes.
Posted on 5/25/21 at 4:04 pm to go ta hell ole miss
quote:
$20-30k per year that’s awesome
Not sure if I do it that long. Kinda helping a buddy out and it's fun. For a year, it might eat into my other job and that wouldn't fly.
ETA- if I did it long term, probably be $1200 a month.
This post was edited on 5/25/21 at 4:06 pm
Posted on 5/25/21 at 4:17 pm to slacker130
I found the easiest way to cover the additional tax was to increase your withholding at your regular job. There are several benefits:
1. It's easy to be late making quarterly payments.
2. Additional withholding doesn't hit the wallet as hard as making quarterly payments 4 times a year.
3. It's easier to avoid penalties for underpayment of tax.
1. It's easy to be late making quarterly payments.
2. Additional withholding doesn't hit the wallet as hard as making quarterly payments 4 times a year.
3. It's easier to avoid penalties for underpayment of tax.
Posted on 5/25/21 at 5:57 pm to cfotiger
Tax CPA here. So far what everyone has said is correct about quarterly payments.
Few other things to consider.
- Depending on the nature of the work you may be able to take deductions against that business income. It is important to take that into account when determining how much to pay quarterly.
- You will have to pay all payroll taxes unlike with your job where your employer pays half. (SE tax is about 15% total in addition to federal income taxes owed)
- You only need to pay in for this year 100% of what you owed last year. So if that is covered by your W-2 withholdings, then you are covered by the IRS safe harbor and theoretically wouldn't need to make estimated payments. You could just pay on April 15 2022.
Few other things to consider.
- Depending on the nature of the work you may be able to take deductions against that business income. It is important to take that into account when determining how much to pay quarterly.
- You will have to pay all payroll taxes unlike with your job where your employer pays half. (SE tax is about 15% total in addition to federal income taxes owed)
- You only need to pay in for this year 100% of what you owed last year. So if that is covered by your W-2 withholdings, then you are covered by the IRS safe harbor and theoretically wouldn't need to make estimated payments. You could just pay on April 15 2022.
This post was edited on 5/25/21 at 6:00 pm
Posted on 5/25/21 at 6:45 pm to slacker130
If you don’t withhold enough, there is a penalty.
Also IF your main job does not max out social security, you will need to pay both sides of that.
I have a side job. My main job maxes out social security, however, still pay 1.6% to Medicare and federal and state.
Get a SEP IRA to deduct some income.
Also IF your main job does not max out social security, you will need to pay both sides of that.
I have a side job. My main job maxes out social security, however, still pay 1.6% to Medicare and federal and state.
Get a SEP IRA to deduct some income.
Posted on 5/25/21 at 8:12 pm to cfotiger
quote:
3. It's easier to avoid penalties for underpayment of tax.
Very true. Withholding is handled more favorably by penalty calculations than quarterly payments.
Eta- it all squares up if you work through all the penalty calculations, but the first one is easiest with withholding vs quarterly.
This post was edited on 5/25/21 at 8:14 pm
Posted on 5/25/21 at 9:54 pm to makersmark1
quote:
Also IF your main job does not max out social security, you will need to pay both sides of that.
I do max social security at my main job.
Thanks to all who responded, this year's taxes might go to a CPA. No more DIY.
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