I am considering becoming an independent contractor. However, I have no idea how successful my venture will be. Should I even pay these taxes during my first year or wait and see how it goes? I don’t want to get in trouble with the IRS.
Dear SB: You will not get in trouble. The only thing that may happen is you get hit with a small penalty for not paying quarterly. Look at IRS.gov and read about the form 1040ES (estimated payments). Unless you make a ton of money, your first is often a year to coast. Get some help next year with Sch C. and try to minimize any profits legally. Keep meticulous records and receipts. If in Sept. or Oct you see you are having a banner year you can at that time send in some federal income tax.
This advice was prepared based on our understanding of the tax law in effect at the time it was written as it applies to the facts that you provided. Click on my profile to read more. Errol Quinn Enrolled Agent Master Tax Advisor
October 30th, 2009 at 12:22 am
If your venture starts producing money then you can file your quarterly 1040ES and pay expected tax payments. Until then I suggest you go to IRS.GOV and under free forms and publications get a little item called a Pub 17 that you can read; it will make it clear the "how, when and why" of what to do.
References :
October 30th, 2009 at 12:35 am
Dear SB: You will not get in trouble. The only thing that may happen is you get hit with a small penalty for not paying quarterly. Look at IRS.gov and read about the form 1040ES (estimated payments). Unless you make a ton of money, your first is often a year to coast. Get some help next year with Sch C. and try to minimize any profits legally. Keep meticulous records and receipts. If in Sept. or Oct you see you are having a banner year you can at that time send in some federal income tax.
This advice was prepared based on our understanding of the tax law in effect at the time it was written as it applies to the facts that you provided. Click on my profile to read more. Errol Quinn Enrolled Agent Master Tax Advisor
References :