# Self-employment quarterly tax + income tax??!!



## jehfmatic (Feb 21, 2016)

Call me ignorant but I just now realized I’ve been screwing up on my taxes. It’s my fault. 

But I never knew on top of the standard income tax we are supposed to be each year by April. (12% bracket for me).

We ALSO have to pay an additional 15% self-employment tax quarterly. So we are supposed to be paying 15% + 12% (my bracket) = 27% in taxes. That is outrageous. And I’m on one of the lowest brackets. If I was in the 22% bracket I would be paying 37% in total taxes.

I did not know this, I was told by Uber drivers that we simply just file once by April every year but this is not the case.


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## Jon Stoppable (Dec 11, 2019)

RS drivers don't have any net earnings, which probably explains your confusion.


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## Stevie The magic Unicorn (Apr 3, 2018)

2 things.

1. You FILE once a year but you are SUPPOSED TO PAY quarterly. This is simply what your supposed to do_* instead of*_ having tax withholding.

2.

If i had $50,000 in uber income i would most assuredly have 60-70,000 in deductible expenses, I'm looking at Orlando numbers so unless your driving X in Orlando your numbers won't be this extreme.

The above math results in a net loss of $10,000-20,000, which means that i would have made $0.00 by IRS standards.

Baring only the markets with the highest per mile pay rates (Over $1.00 per mile) I'd expect you to not turn a profit on paper, and not owe anything.


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## SHalester (Aug 25, 2019)

idk, I had a whopping $125 net income for 2019. But I only started like in Sept. Maybe a full year I'd have eked out a net loss.


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## dmoney155 (Jun 12, 2017)

jehfmatic said:


> Call me ignorant but I just now realized I've been screwing up on my taxes. It's my fault.
> 
> But I never knew on top of the standard income tax we are supposed to be each year by April. (12% bracket for me).
> 
> ...


At least you're not in Canada, you be paying through your nose... we basically work for our lords in Ottawa.


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## Taxi2Uber (Jul 21, 2017)

jehfmatic said:


> Call me ignorant but I just now realized I've been screwing up on my taxes. It's my fault.


Um...ok....you're ignorant.


jehfmatic said:


> We ALSO have to pay an additional 15% self-employment tax quarterly. So we are supposed to be paying 15% + 12% (my bracket) = 27% in taxes. That is outrageous. And I'm on one of the lowest brackets. If I was in the 22% bracket I would be paying 37% in total taxes.


Doing it this way, you're STILL screwing up on your taxes.


jehfmatic said:


> I was told by Uber drivers that....


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## dmoney155 (Jun 12, 2017)

Just shell out some money and go see legitimate accountant.


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## Uberguyken (May 10, 2020)

Quarterly my ass, I end the year with a net loss every year. I'm not loaning uncle Sam a damn thing. If you drove Uber and didn't end the year at a net loss after expenses... You need some serious one on one time with a pro driver to figure out what your doing wrong...

Earn $50k

Expense $50k+

Equals I don't owe shyt. Next game please...


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## Older Chauffeur (Oct 16, 2014)

If you or your spouse have regular employment you can increase payroll tax withholding instead of making quarterly payments. The basic IRS rule says that if you owe more than $1000.00 at tax time, you need to pay estimated quarterly payments toward the next year‘s taxes. There are exceptions: if you have paid in an amount equal to 100% of the prior year’s tax due, or 90% of the current year’s tax due, quarterly payments aren’t required.
The self employment tax (SECA) is 15.3% on your net profit, with a $400.00 threshold. As others have said, expenses bring taxable income way down. Paying SECA is similar to FICA that is withheld from your pay from regular employment.


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## RobLinn (Aug 10, 2019)

For federal tax you only have to file quarterly IF you show a profit for the quarter (most of us show a net loss quarterly & don’t file)
If you show a profit at the EOY you will likely get hit with a penalty for not filing quarterly (unless you show that profit in the Q4 then your ok)


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## Launchpad McQuack (Jan 8, 2019)

RobLinn said:


> (unless you show that profit in the Q4 then your ok)


Even if your only profit is in Q4, you still have to pay by January 15 unless you file your income tax return before February 1.


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## oldfart (Dec 22, 2017)

Whether you pay it quarterly or pay annually, your tax bill will be the same 22%income tax and 15% self employment tax. But your gross income is at least partially offset by business and mileage deductions

If you were a w2 employee you would be paying the same income tax (22%) plus 7.5% toward social security and Medicare without offsetting business and mileage deductions

On a tax basis alone most would say comparing the same w2 gross income with 1099 gross income you will do better with 1099 income

If you have a choice however many would say w2 income is better because of benefits


By the way, when you get to be my age you will wish you had been paying that self employment tax. The social security income I get helps pay the bills


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## Tony73 (Oct 12, 2016)

Heard that before, still file once a year by April with the same accountant from last 15 years. No issues. They probably rather you pay quarterly because they can’t trust people to pay $5,000+ in one go. Or since U/L does all the logging it’s not a concern compared to a small independent business.


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## PTB (Feb 3, 2015)

Older Chauffeur said:


> If you or your spouse have regular employment you can increase payroll tax withholding instead of making quarterly payments. The basic IRS rule says that if you owe more than $1000.00 at tax time, you need to pay estimated quarterly payments toward the next year's taxes. There are exceptions: if you have paid in an amount equal to 100% of the prior year's tax due, or 90% of the current year's tax due, quarterly payments aren't required.
> The self employment tax (SECA) is 15.3% on your net profit, with a $400.00 threshold. As others have said, expenses bring taxable income way down. Paying SECA is similar to FICA that is withheld from your pay from regular employment.


what are my options?

if I pay 100% of tax due for 2020 $4k, does that mean I qualify for the exception and do NOT have to pay quarterly taxes ???

2019 tax penalty $1
2020 tax $4k due

Can you help me understand Estimated Taxes based on the following:

I am new to Estimated Taxes,

this is the form called Ext Tax Options-----

*'Estimated Tax Payment Options'

Prepare my 2021 Estimated Taxes based on*
(x) 100% of 2020 ...........$5k

*Amount of Estimated Taxes to Pay in 2021*
Taxes based on method above................................................$5k
Expected Witholding for 2021 (2020 actual withholding) ..........$1k
Taxes due after withholding......................................................$4k
Balance of estimated taxes due ..............................................$4k

*Prepare Estimated Tax Payment Vouchers*
(x) The amount of estimated taxes due is $1k or more

*Schedule of Estimated Tax Payments for 2021* (note: THERE ARE NO (x) in this section, so all are ( )
( ) Payment 1 April 15 2021...................$1k
( ) Payment 2 June 15 2021..................$1k
( ) Payment 3 Sept 15 2021...................$1k
( ) Payment 4 Jan *18* 2021....................$1k

*Print Estimated Tax Vouchers*
(x) Yes, print those prepared by program


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## Daisey77 (Jan 13, 2016)

RobLinn said:


> For federal tax you only have to file quarterly IF you show a profit for the quarter (most of us show a net loss quarterly & don't file)
> If you show a profit at the EOY you will likely get hit with a penalty for not filing quarterly (unless you show that profit in the Q4 then your ok)


I have shown a profit every year. I Typically file and pay taxes by the end of February. I've never been hit with a penalty for not paying quarterly.


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## Young Kim (Jan 28, 2015)

Daisey77 said:


> I have shown a profit every year. I Typically file and pay taxes by the end of February. I've never been hit with a penalty for not paying quarterly.


Me too Daisy. I never got a hit either for not paying quarterly. I hope the OP never gets in any trouble. I never had an issue.


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## Older Chauffeur (Oct 16, 2014)

PTB said:


> if I pay 100% of tax due for 2020 $4k, does that mean I qualify for the exception and do NOT have to pay quarterly taxes ???


I don't think so, although a couple of posters after yours said they haven't been penalized for not making quarterly payments. (They didn't indicate what the amounts were or whether they met the requirements.)
When you pay the $4000 at filing time in one lump sum, it doesn't meet the threshold of 90 or 100% already paid in, either by withholding or estimated payments, so my reading of the rules tells me that you need to follow those quarterly payments as listed, by the due dates.
I am not a tax professional, so you might want to check with @UberTaxPro on his main tax thread:
https://www.uberpeople.net/threads/tax-season-is-upon-us-ask-me-whatever.377254/


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## PTB (Feb 3, 2015)

Older Chauffeur said:


> I don't think so, although a couple of posters after yours said they haven't been penalized for not making quarterly payments. (They didn't indicate what the amounts were or whether they met the requirements.)
> When you pay the $4000 at filing time in one lump sum, it doesn't meet the threshold of 90 or 100% already paid in, either by withholding or estimated payments, so my reading of the rules tells me that you need to follow those quarterly payments as listed, by the due dates.
> I am not a tax professional, so you might want to check with @UberTaxPro on his main tax thread:
> https://www.uberpeople.net/threads/tax-season-is-upon-us-ask-me-whatever.377254/


agree, the way I interpret this is if my total tax(line 16) for 2019 was say $2k and my withholdings for 2020 was say $1k, then I did not meet the 100% guideline and therefore would need to pay both $4k tax due and the 2021 estimated taxes quarterly.
so $4k+$1k due before April 15th and then $1K,$1K,$1K for the following quarters.

then in 2022, big tax refund cuz my income would drop down to normal levels


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## Older Chauffeur (Oct 16, 2014)

Or, if you're pretty sure of the drop in income, you could reduce those quarterly estimated payments accordingly, as you would only need to have paid in 100% of the tax due for the 2021 tax year, not 90% of the amount that you owe for 2020. Does that make sense?


PTB said:


> agree, the way I interpret this is if my total tax(line 16) for 2019 was say $2k and my withholdings for 2020 was say $1k, then I did not meet the 100% guideline and therefore would need to pay both $4k tax due and the 2021 estimated taxes quarterly.
> so $4k+$1k due before April 15th and then $1K,$1K,$1K for the following quarters.
> 
> then in 2022, big tax refund cuz my income would drop down to normal levels


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## PTB (Feb 3, 2015)

[HEADING=3]yea, the lesser of the two.....but I think you have the years swapped in your example.[/HEADING]
so if my income drops in 2021, then I need to make sure I pay estimated taxes to equal or greater than 90% of my 2021 tax
and when they say 'tax' , I think they mean the 'Total Tax' (for example, Form 2210,Part I,Line 4) Current Year Tax

1040,line 24 total tax is the same as 2210,part I,Line 4 Current Year Tax

so do not consider Total Payments / Credits in this equation.

so for example , if my Total Tax for 2021 is approximately $2k, then 90%x$2k = $1800, whereby I would pay $450 quarterly.
instead of the $4k, then 100%x$4k = $4k, whereby I would pay $1000 quarterly .

https://www.irs.gov/instructions/i2210
[HEADING=3]2021 taxes[/HEADING]
[HEADING=3]Who Must Pay the Underpayment Penalty[/HEADING]
In general, you may owe the penalty for 2021 if the total of your withholding and timely estimated tax payments didn't equal at least the smaller of:


90% of your 2021 tax, or
100% of your 2020 tax. Your 2020 tax return must cover a 12-month period.


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## Older Chauffeur (Oct 16, 2014)

PTB said:


> yea, the lesser of the two.....but I think you have the years swapped in your example.


You're absolutely correct. &#129318;&#127996;‍♂&#129318;&#127996;‍♂


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## SOLA-RAH (Dec 31, 2014)

dmoney155 said:


> Just shell out some money and go see legitimate accountant.


Don't do this. It's not that complicated and will be money wasted.
If uber is your sole income source, don't sweat it. You'll have very little net income after deducting your expenses, thus low income tax and self-employment tax owed. But if uber is your side-gig in addition to a W-2 job, you should be paying quarterly to avoid penalties. Sending in 20% of your uber gross for quarterly estimated taxes will get you pretty darn close. The alternative option is to up the taxes withheld thru your W-2 job to cover.


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