Help with 1099 (Schedule C) taxes

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
tapotti
Posts: 50
Joined: Thu Jun 02, 2011 8:37 pm

Help with 1099 (Schedule C) taxes

Post by tapotti » Tue Sep 11, 2018 8:00 pm

Hi all,

I'm a physician who has always had W2 income. This year, I'm going to have a little bit of side income as a self proprietor. I know I'm supposed to pay quarterly estimated taxes on this income, but I'm a little bit confused on how to do so and I have a couple questions.

A little about me:
Total taxable W2 income: >$600,000. As such, I believe I'll be in the highest tax bracket.
Income as self proprietor (so far): $27,500

1) Based on the numbers above, does anyone know if I'm allowed to take the 20% pass through deduction on the $27,500?

2) Since I maxed out social security taxes at my main job, I only have to pay Medicare taxes on the $27,500, right? And given my tax bracket, this would be 2.3%?

3) Related to above, I can deduct half of the medicare tax from my gross income, correct?

Thanks.

PFInterest
Posts: 2684
Joined: Sun Jan 08, 2017 12:25 pm

Re: Help with 1099 (Schedule C) taxes

Post by PFInterest » Tue Sep 11, 2018 8:16 pm

1- nope
2- plus surtax.
3- only from the 1099 portion.

Easiest is to increase witholding on the W2 to cover the 1099. Therefore no quarterly payments needed.

JBTX
Posts: 4243
Joined: Wed Jul 26, 2017 12:46 pm

Re: Help with 1099 (Schedule C) taxes

Post by JBTX » Tue Sep 11, 2018 8:28 pm

tapotti wrote:
Tue Sep 11, 2018 8:00 pm
Hi all,

I'm a physician who has always had W2 income. This year, I'm going to have a little bit of side income as a self proprietor. I know I'm supposed to pay quarterly estimated taxes on this income, but I'm a little bit confused on how to do so and I have a couple questions.

A little about me:
Total taxable W2 income: >$600,000. As such, I believe I'll be in the highest tax bracket.
Income as self proprietor (so far): $27,500

1) Based on the numbers above, does anyone know if I'm allowed to take the 20% pass through deduction on the $27,500?
I think so. The link below explains it pretty well.



https://www.kitces.com/blog/pass-throug ... bi-limits/

2) Since I maxed out social security taxes at my main job, I only have to pay Medicare taxes on the $27,500, right? And given my tax bracket, this would be 2.3%?

Basically yes.

Medicare is 2.9% both sides employer + employee plus another 0.9% for incomes over $250k MFJ.

https://www.fidelity.com/viewpoints/per ... care-taxes


3) Related to above, I can deduct half of the medicare tax from my gross income, correct?

Thanks.
I think the net result of the computation is you will get a business expense deduction on half of the 2.9%.

User avatar
FiveK
Posts: 5828
Joined: Sun Mar 16, 2014 2:43 pm

Re: Help with 1099 (Schedule C) taxes

Post by FiveK » Wed Sep 12, 2018 1:26 am

tapotti wrote:
Tue Sep 11, 2018 8:00 pm
1) Based on the numbers above, does anyone know if I'm allowed to take the 20% pass through deduction on the $27,500?
AFAIK, the only canned tax calculation that currently attempts the QBI deduction is the personal finance toolbox spreadsheet. Looking at that with the numbers you provided, it seems any deduction will depend on
a) whether your self-proprietor business is a “qualified business” (in particular, not a "specified service business"). If not a qualified business, then no deduction. If it is a qualified business,
b) the amount of W-2 wages paid by the business and/or the amount of "qualified business property."
See QBI Pass-through deduction in the case study spreadsheet for more on what is and is not covered by that tool.
2) Since I maxed out social security taxes at my main job, I only have to pay Medicare taxes on the $27,500, right? And given my tax bracket, this would be 2.3%?
Self-Employment tax would be 2.9% of 92.35% of $27,500. Additional Medicare Tax - Form 8959 will hit both the W-2 and 1099 earnings. See the spreadsheet linked above for calculation details on this also.
3) Related to above, I can deduct half of the medicare tax from my gross income, correct?
Half the self-employment tax, but not the "additional medicare tax."

Spirit Rider
Posts: 9144
Joined: Fri Mar 02, 2007 2:39 pm

Re: Help with 1099 (Schedule C) taxes

Post by Spirit Rider » Wed Sep 12, 2018 12:46 pm

The Section 199A 20% QBI deduction has a taxable income phaseout for service businesses. You are way above the MFJ phaseout of $415K

If this side income is from the performance of services, you will not be eligible.

Post Reply