First Time Figuring Estimated Tax Payments
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My wife works as a private home care nurse. She will receive a 1099 form at the end of the year. Is she required to submit estimated tax payments when the estimated taxes are based upon last year’s return, when she was a W-4 employee? How does one calculate the estimated taxes when there is no viable income with which to compare? Her hours, pay rate and benefits are drastically different. What are the requirements of a self-employed person who is working as self-employed for the first year? How does this affect or how is this affected by my income, which is W-4 based? Lastly, what, if any, are the state requirements? I live in California. Is this something that taxpayers can do themselves, or is it something that a tax expert needs to handle? Thank you for your help.
— Daniel
Your wife may be required to submit estimated tax payments if you end up owing $1,000 or more in taxes for 2014 after subtracting your withholding and any “refundable credits.” You can avoid the “penalty for underpayment of estimated tax” for 2014 if you pay 100 percent of your 2013 tax if your adjusted gross income, or AGI, was $150,000 or less. If your AGI was more than $150,000, then you can avoid the penalty by paying 110 percent of your 2013 tax. However, for all taxpayers, if at least 90 percent of your 2014 tax liability is paid through withholding or estimated tax payments, then the penalty is avoided.
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— Daniel
Your wife may be required to submit estimated tax payments if you end up owing $1,000 or more in taxes for 2014 after subtracting your withholding and any “refundable credits.” You can avoid the “penalty for underpayment of estimated tax” for 2014 if you pay 100 percent of your 2013 tax if your adjusted gross income, or AGI, was $150,000 or less. If your AGI was more than $150,000, then you can avoid the penalty by paying 110 percent of your 2013 tax. However, for all taxpayers, if at least 90 percent of your 2014 tax liability is paid through withholding or estimated tax payments, then the penalty is avoided.