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Moonlighting Taxes - need to file quarterly?

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  • Moonlighting Taxes - need to file quarterly?

    Hey WCI colleagues,

    I am moonlighting in a relatively significant way for the first time in 2017, and have never come across the need to file taxes more than just once at the yearly tax deadline.  In 2017, I have already made $6500, and will probably make another $5000 before the year ends.  The company pays me without withholding any money for taxes, and provides me with a 1099misc form during tax season.  My question is, do I need to be sending in estimate tax payments on a quarterly basis at this time?  If so, how do I do that? Thanks everyone, I appreciate your input.

    Dan

  • #2
    First, there are safe harbors:

    • Your 2017 withholding + estimated tax payments is >= 100% of your 2016 tax liability or >= 110% if AGI >= $150K.

    • Your 2017 withholding + estimated tax payments is >= 90% of your 2017 tax liability.

    • Your tax owed for 2017 is <= $1K.


    Then your additional tax liability on this moonlighting is unlikely to be that much ($300 - $500).

    How much is your typical refund or tax due?

    Even if your tax liability is not in safe harbor, all that would be necessary is increase your W-4 withholding. For this small amount this would likely be easier than estimated tax payments.

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    • #3
      Increase your W2 then no. Otherwise yes.

      Comment


      • #4
        I always thought it dependent on if you had to pay taxes the year before. Meaning when you filed you owed more money to the IRS. If so, then there is the above equation by spirit rider. If you did not owe anything in 2016, then you can let it ride for 2017 without paying a penalty. If you did owe taxes in 2016 above your withholdings then you have to calculate out how much is due and pay it quarterly.

         

        I think this is right. It is what I have done over the years when I did contract work/moonlighting. Anyone with more tax expertise please feel free to chime in.

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        • #5


          I always thought it dependent on if you had to pay taxes the year before. Meaning when you filed you owed more money to the IRS. If so, then there is the above equation by spirit rider. If you did not owe anything in 2016, then you can let it ride for 2017 without paying a penalty. If you did owe taxes in 2016 above your withholdings then you have to calculate out how much is due and pay it quarterly.
          Click to expand...


          Not exactly. In general terms, you must pay in at least the amount of your tax liability for the prior year. What you end up owing has little effect. So, for example, if your total liability for 2016 was $50k and you withheld $55k, you'll get a refund of $5k. But if your 2017 liability is $60k and you withheld only $45k because more of your work was as an IC, then you'll owe a penalty.


          My question is, do I need to be sending in estimate tax payments on a quarterly basis at this time?  If so, how do I do that? Thanks everyone, I appreciate your input.
          Click to expand...


          Typical rule of thumb if you are in a high tax bracket and have moonlighting income in addition to your W2 is to set aside 40% if you have no state taxes, 50% if you do. Of course, remember that your tax liability will be calculated on the net income (after deductions), so you need to plan for that 40% - 50% net calculation.

          If your moonlighting income will net < $20k, I agree with others to raise your withholding. This is not simply because of convenience but because withholding is treated as evenly distributed throughout the year, while quarterly taxes are counted when received. So you can take care of a $10,000 unpaid quarterly tax liability by withholding that much extra on your last paycheck of the year.

          If you'll owe more, you probably should ask your CPA to do a tax projection so you can pay estimates or use one of the free online calculators. You can print out your own estimated payment vouchers here.
          Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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          • #6
            Thanks for the responses everyone - taxes are the black hole that I have yet to really delve into within the realm of personal finance.

            It sounds like the safest way to approach the situation is to simply withhold additional wages from my W2 income, as opposed to making quarterly estimated tax payments. So if I am planning to make ~ $11,000 in moonlighting (1099misc) in 2017, and was putting aside approximately $5000 for taxes, it would be okay to just increase my W2 withholdings to account for that money?  I guess the federal government doesn't distinguish (or care) where the tax money comes from?

            In 2016, I owed approximately $1000 when filing.  Since that time, I increasing my W2 withholding, which should account for that.  Now, to account for the $5000 in moonlighting taxes in 2017, should I simply calculate how much additional to withhold to account for all of that?  I guess I am just unclear how much additional money to withhold per paycheck.

            Again, thanks everyone.

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            • #7


              So if I am planning to make ~ $11,000 in moonlighting (1099misc) in 2017, and was putting aside approximately $5000 for taxes, it would be okay to just increase my W2 withholdings to account for that money?  I guess the federal government doesn’t distinguish (or care) where the tax money comes from? In 2016, I owed approximately $1000 when filing.  Since that time, I increasing my W2 withholding, which should account for that.  Now, to account for the $5000 in moonlighting taxes in 2017, should I simply calculate how much additional to withhold to account for all of that?  I guess I am just unclear how much additional money to withhold per paycheck.
              Click to expand...


              If you get paid bi-monthly, you would have your payroll dept. w/h an additional $357.14 per paycheck, beginning in June, calculated as follows:

              (5,000 taxes)/(14 remaining pay periods in 2017)

              I'd just go ahead and round up to whatever you're comfortable with.
              Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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              • #8
                Awesome, thanks!

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