Taxes, W2 and 1099 Earnings

[Alex.]

Hi,

If anyone knows the answer to this I would greatly appreciate it!

In 2009 when I do my tax return (I use Turbo Tax) I should have money coming back to me based on my W2 earnings, but I will owe the government based on a little bit of 1099 earnings.

I am assuming this is doable, but I just want to ask: is it possible all within doing my tax return to credit the money that would come back to me from the government and apply it to paying the taxes on my 1099 earnings right then?

 

[ziggy29]

That's not quite how it works. You file one return, and your net 1099 income (minus expenses, if any, which I assume are going on Schedule C) is added into your total taxable income -- added with your W-2 income. You don't file a return for W-2 income, get a refund and then file again to pay the tax on the 1099 income.

The first thing I'd be concerned about is that if you haven't paid estimated quarterly taxes on your 1099 income, you need to make sure you've had enough withheld from your W-2 income to reach "safe harbor" provisions for avoiding penalties for underwithholding.

For most taxpayers (except those at rather high income levels), there are three ways to be in "safe harbor":

* If the amount of tax withheld is at least 90% of the tax due this year;

* If the amount of tax withheld is at least 100% of last year's total tax liability;

* If the amount you still owe the IRS is less than $1,000.

If any one of these applies, there will be no penalty for the underwithholding.

If your W-2 income would have been overwithheld absent the 1099 income, then some of what *would* have been a tax refund would instead go to paying the tax due on the 1099 income not yet taxed. A lot of households that have a mix of W-2 and 1099 do this -- overwithhold intentionally on the W-2 income in order to cover the taxes that would be due on the 1099 income, and thus avoid the need to file quarterly estimated payments.

 

[Alex.]

Thank you so much - this was perfect.

Luckily I believe I will owe 1099 wise a bit under $1,000, so I think things will work out.

However, this will help me later on because I anticipate making more 1099 earnings next year and I will want to do quarterly payments.

 

[frayne]

Ziggy nailed it but you could file a return with just your W-2 income, and then after you get your refund, file an amended return with your 1099 earnings. Kind of a screwy way of doing it but perfectly legal and acceptable.

 

[Bestwifeever]

What Ziggy said happened for us. I worked for a few years freelance and got 1099 income. I know we're idiots, but we always had way too much withheld from DH's W-2 income. When we filed our joint income tax, the amount withheld for his income generally covered the taxes due on my 1099 income. It is all together on one return.

If you use TurboTax or TaxAct or TaxCut, it will guide you through the filing for all your income at once. If you owe money, the program will also suggest (and provide you with the form for it) mailing quarterly tax payments. We never did that and never had an IRS problem with it.

 

[Raygun99]

Also don't forget to clain as much legitimate expenes you can document on your schedule C to offset tax and social security tax.