First Time Consulting - how to pay self employment taxes

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bikechuck
Posts: 357
Joined: Sun Aug 16, 2015 9:22 pm

First Time Consulting - how to pay self employment taxes

Post by bikechuck » Sat Dec 30, 2017 2:52 pm

My wife and I retired in 2017 and her employer has her on a 6 month consulting contract where they can call her for advice etc. Both of us have been employees throughout our careers but we do realize that she needs to pay self employment taxes (for social security and medicare) and quarterly withholding for income taxes.

I am not at all sure how this is done. Do we just get a form for quarterly estimates from the IRS. Is there a separate payment for income taxes and self employment taxes or does it all get co mingled as it is paid and then gets sorted out on the year-end tax return?

Any help or useful links to sort this out would be most appreciated! Her first payment will be in January so we are trying to get a handle on this in the next week or so.

livesoft
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Re: First Time Consulting - how to pay self employment taxes

Post by livesoft » Sat Dec 30, 2017 2:57 pm

Read the IRS Publication: https://www.irs.gov/pub/irs-pdf/p334.pdf

One can easily pay by using the IRS DirectPay system. Google it. There are also about 4 other ways to pay, but I find them inferior.

When and how much it explained in Pub 334 or Pub 17 or by reading IRS instructions. You are in the big leagues now and cannot rely on random internet forums and tax software anymore.
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solobuildingblogs
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Re: First Time Consulting - how to pay self employment taxes

Post by solobuildingblogs » Tue Jan 02, 2018 2:00 am

Assuming you are taxed on schedule C as a sole proprietor it’s a pass through just like S Corp. you can use schedule SE to estimate your self employment taxes. Everything else is taxed at your marginal bracket. It’s comingled and separated on 1040 at end of year. You can pay estimated taxes online just google how to.

The irs safe harbor is 100% of last year’s taxes or 90% of your total tax, whichever is less if I remember correctly off the top of my head. I think it might be 110% of last year for high earners.

kaneohe
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Re: First Time Consulting - how to pay self employment taxes

Post by kaneohe » Tue Jan 02, 2018 3:22 am

Although your focus seems to be on SE taxes, now that you are retired you should be concerned about the total picture which includes your regular taxes on all your income (including your net SE income which is your gross SE income less expenses) as well as the SE taxes. You can use a tax calculator like this https://www.hrblock.com/tax-calculator/ ... e/aboutYou

to calculate your tax on all your income . After inputting your personal info, income & withholding, and deductions you will come to the final results page. Your Summary shows what you might owe still in taxes. Some that might be due in mid Jan, the rest in April
Be sure to click on the + signs on that page to expand and show details such as regular tax, SE tax, total tax (in blue bar).

You can read about the safe harbor......the minimum you should pay in withholding/estimated taxes by Jan 15 to avoid penalty
http://fairmark.com/estimate/howmuch.htm

This is the form you use to send in your Q4 estimated tax the old-fashioned snail mail way ......use voucher 4 https://www.irs.gov/pub/irs-pdf/f1040es.pdf and yes, the SE tax is just a part of the total tax so it is integrated into the process, not separate.

Swansea
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Re: First Time Consulting - how to pay self employment taxes

Post by Swansea » Tue Jan 02, 2018 7:07 am

I had a small consulting contract after retirement. When I used turbo tax that year, it took care of the social security employer and employee payment.

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