AboutRichard Fritzler Expertise I am in the business of tax planning for business owners. Our company helps business owners structure so that they can be reduce the taxes that they owe, making them far more profitable.
Experience Since 1986 I have been helping successful business owners reduce taxes, protect assets, and limit their liability. The company is Owelesstax, incorporated at www.owelesstax.com
Organizations National Small Business Owners Association.
Nevada Association of Listed Resident Agents.
Citizens Legal Association
The Business Owners Institute
Publications Contributing author to "The Corporate Standard Newsletter".
I am also a writer for an email newsletter about business
Googlegroups/Successfulbusiness
I am also an Expert in the areas of Tax Law, Retirement Planning, and Estate tax issues.
My last day at the corporation I work for will be 10/30/09. I will then be self-employed from 11/1 until probably mid-March 2010 working on a contract job. Do I have to pay the quarterly taxes on 1/15/2010 or can I wait until 4/15/2010? I'm reading info online and there is a sentence on a site ("you usually have to pay estimated tax in 4 installments, starting on 4/15") which makes me wonder when I need to start paying quarterly taxes.
ANSWER: That statement is made based upon the assumption of a January 1 start date. You are starting before Jan 1 so your quarterly would be before April.
That quarterly payment is going to be big. Not only do you have to do the income tax withholding, you'll also be paying the Self Employment tax which is an additional 15.3%.
What happens after March 2010?
If I knew that, I could make some suggestions that in addition to saving you taxes overall could also reduce or eliminate the quarterlies for 2010.
Richard Fritzler
800 590-6612
www.nevadacorporateservices.com
---------- FOLLOW-UP ----------
QUESTION: Thanks Richard for your reply.
I've capped out on having to pay SS tax given my earnings at my current job, so the self-employment tax shouldn't be that high for the Jan '10 payment outside of Medicare, right? For the Jan payment, don't I also have to pay taxes on any dividends and interests I've earned for 2009 outside of my self-employment. Do I just estimate that since I will most likely not get all my paperwork from all the financial institutions by 1/15/10?
At this point, no idea what will happen after March '10. I anticipate collecting unemployment insurance while I look for a job. Also, I don't think I'll be working full-time Nov and Dec, in fact, I probably will be collecting some unemployment insurance during Dec since it will be a slow month at the company I'm contracting at.
Answer If you have already capped out SS, than you are definitely due to convert from contractor as an individual to contractor as a Real Corporation.
While you may not have to pay 12.4% in SS, you'll still have to pay 2.9% in Medicare AND you are paying 28% or better in Federal Income taxes, AND (you didn't mention what state you are in but# there are probably State Taxes on that income,
AND you are pushing into Phase Out where you start to lose your personal deductions,
AND Since this is Business Income you may experience the AMT which would reduce your deductibility of what ever business expenses you might have.
Let's not parse the taxes and then only consider one.
Let's look at the whole.
On the Whole you are in a 30.9% or higher FEDERAL tax rate #could be 37.9%, you didn't tell me your income level), plus whatever your state rate is on the dollars you intend to earn between Nov 1 and Mid March.
Or you could choose, within the rules to pay 15% total on those dollars.
You choose.
It could be even lower than 15% but decide first if 15% is a better number.
Collecting unemployment is another point we can discuss.
Richard
Okay, for your question:
the Quarterly payment is for your "earned" income; brokerage account profits are unearned and not subject to Self Employment taxes or Withholdings by your sole proprietor business. These are accounted for at the final tax return.
It does have to include Medicare AND your estimated Withholdings.
There is no Tax Relief in quarterly payments or in being a 1099 employee.
Richard Fritzler
www.nevadacorporateservices.com
phone 800 590-6612
