questions about 1099 income and taxes

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Topic Author
s2kmw
Posts: 29
Joined: Mon Feb 23, 2015 11:50 am

questions about 1099 income and taxes

Post by s2kmw »

Hello,
I will be getting 1099 income this year for a consulting job for the first time in my career in addition to W2. This will only be a few thousand dollars. Because i've been paid with W2's before, I'm not familiar on how to take out taxes for the 1099 income. What taxes do I need to take out and do I need to do this quarterly or can I wait until I file my yearly return? The income is variable so it's hard to tell how much I'll be getting. ALso - I plan on putting it all into a solo 401k at the end of the year.

THanks for you help!
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House Blend
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Joined: Fri May 04, 2007 1:02 pm

Re: questions about 1099 income and taxes

Post by House Blend »

So, the main new wrinkle is that you'll owe payroll tax: SS + medicare, in addition to regular income tax when you file.

That requires filing Schedule SE.

And you will report the income itself on Schedule C or (more likely, for simple situations) C-EZ.

Note that if you have any deductible business expenses, you can also claim them on C/C-EZ. It's way better than employee business expenses, those are deductible only to the extent that they exceed 2% of AGI and go on Schedule A. Schedule C deductions reduce your AGI right off the bat.

I've occasionally had a W-2 job and a 1099 job in the same year. In those years, I have increased my withholding on the W-2 job so that I don't have to pay estimated tax.
livesoft
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Re: questions about 1099 income and taxes

Post by livesoft »

You cannot put it all in a solo 401(k) at year end. You will be limited and more so if you contribute to your W-2 401(k) plan.

You do not have to pay quarterly taxes nor have taxes withheld from the 1099. Simply adjust your W-2 paycheck withholdings from your other job to account for the taxes that you will need to pay as mentioned by House Blend. I've been doing it that way for more than 30 years. It's simple and it works.

The IRS has lots of easy to read publications for this situation: www.irs.gov
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Topic Author
s2kmw
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Joined: Mon Feb 23, 2015 11:50 am

Re: questions about 1099 income and taxes

Post by s2kmw »

thanks for the replies so far.

I think increasing the witholdings is what I will do since it will be only a small amt of income.

My current job does not have a 401k (yet)...so I could put up to 18000 (employee contribution) into the solo 401k right?
livesoft
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Re: questions about 1099 income and taxes

Post by livesoft »

s2kmw wrote:My current job does not have a 401k (yet)...so I could put up to 18000 (employee contribution) into the solo 401k right?
The technical answer is No. The amount you can contribute will depend on the amount of Schedule C income you have and the amount of FICA/medicare taxes on that income. The IRS has a calculator for that and there are similar ones on the web.
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Topic Author
s2kmw
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Joined: Mon Feb 23, 2015 11:50 am

Re: questions about 1099 income and taxes

Post by s2kmw »

Ah I see what you're getting at. I understand that...sorry for the confusion.
EnjoyIt
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Joined: Sun Dec 29, 2013 7:06 pm

Re: questions about 1099 income and taxes

Post by EnjoyIt »

livesoft wrote:You cannot put it all in a solo 401(k) at year end. You will be limited and more so if you contribute to your W-2 401(k) plan.

You do not have to pay quarterly taxes nor have taxes withheld from the 1099. Simply adjust your W-2 paycheck withholdings from your other job to account for the taxes that you will need to pay as mentioned by House Blend. I've been doing it that way for more than 30 years. It's simple and it works.

The IRS has lots of easy to read publications for this situation: http://www.irs.gov
To my understanding you can have multiple company sponsored 401Ks. For 2015 your employee contribution is maxed at $18K. But if you have multiple employers, each employer can fund their own 401K and each one has a maximum of $53K for 2015.

Some limitations:
You can only fund upto $53K total employee and employer contributions to a particular 401K.
You can exceed the $53K maximum if the different employers are not the same entity. For example your W2 job can have employer funded 401K for $35K. Then you can have your 1099 job have an employer funded 401K for another $35K and you can fund another 18K employee contribution. This exceeds the $53K limit.
Employer can only fund upto 25% of wages. Employee can fund upto $18K but not exceed wages.

Basically in your situation if you already max employee contributions at your W2 job ($18K) you can only contribute 25% employer contributions at your 1099 job. If your W2 job only has employer contributions then you can place all of your 1099 income via employees contributions into the solo 401K upto a max of $18K.

I hope that makes sense.
A time to EVALUATE your jitters: | viewtopic.php?p=1139732#p1139732
EnjoyIt
Posts: 8244
Joined: Sun Dec 29, 2013 7:06 pm

Re: questions about 1099 income and taxes

Post by EnjoyIt »

New pertinent comments added prior to me finalizing that post above.

Yes you can contribute upto $18K in a solo 401K minus social security and Medicare. This amount can not exceed your 1099 wages.
A time to EVALUATE your jitters: | viewtopic.php?p=1139732#p1139732
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