Freelancing and Taxes

I've tried a quick search through this forum, but couldn't find anything related to my question. My apologies if this has been answered elsewhere.

I started working for the local paper as a freelancer/stringer three months ago. On all my paychecks, they list me as an Independent Contractor and don't withhold any amount for taxes or anything.

That's fine...I set aside 30% of those checks in a separate savings account. But, I've been reading recently about needing to make quarterly estimated tax payments to the IRS. However, I have friends who do some independent contract type work on the side, and they simply process it all with their other tax returns once a year.

I am not incorporated, or running as a business. I am not trying to claim my cameras as equipment expenses or anything like that (not yet, anyway). I get an assignment from the editor, I shoot it, and then send in an invoice at the end of every month.

Can anyone advise me about the need to make quarterly payments, or whether I can wait until tax time next year?

My accountant told me when I needed to make quarterly payments. I think that if you're not up in the $20-30K range just wait until tax time. My advice is not official so you should check with an accountant.

Not a tax expert either but I have been self-employed for nearly 20 years...

You can pay quarterly estimated taxes but you run the risk of getting "probed" if you aren't within a certain percentage of being correct in your estimate. IIRC, you need to be within about 10% or so of being correct.

The other option is to not pay quarterly estimated tax and pay it all at the end of the year but you may encounter (minor) penalties for doing it this way.

BTW, 30% set aside probably isn't enough to cover both income tax and social security...

The real key is to find an accountant who understands the nature of being self-employed and is willing and able to be "creative" (within the allowances of the law) with how things are itemized.

Another thing to be aware of is that if you are being told when to work, where to work, how long to work and if you are using any of the papers gear, you are (according to the IRS) an employee. The IRS definition of an "Independant Contractor" is someone who can come and go as they please and provide all tools and materials with which to do what they do.

Your newspaper could get in very hot water for not properly reporting what they pay you.

But as mentioned earlier (and I'm sure it will be the consensus) seek professional financial help.

http://www.irs.gov/faq​s/faq12-9.html

Another (possible) option, assuming you have a day job.

I have two sidelines, one doing some independent contractor engineering work, the other as a wanna-be photog.

I've set up my full time job to withhold extra taxes from my paycheck. Its simple and almost painless.

I pay quarterly.

I am an independant contractor in the IT industry and make well over the $20k-30k mark. I receive a 1099 at the end of the year from the company I am contracting for. You will probably get a 1099 from the newspaper. Did you fill out any paperwork with your SS# when they hired you? that was probably for the 1099. the first 4 years I did not pay quarterly, I just payed annually and was usually hit with a $400 penalty for not paying quarterly. I am paying quarterly this year to save me the $400 penalty and the panic towards the end of the year worrying if I've saved up enough to pay in full. Your estimated quarterly taxes are basically the amount you paid last year, divided by 4. You'll have to pay any overage if you earned more than the previous year or have fewer deductions.

If this is your full time job then yes by all means pay quarterly, if however you have more income coming in and you get a 1099 from the paper just pay the taxes at the end of the year when you do your taxes and your schedule C unless you are making a significant amount then you might want to pay quarterly

I'd agree that setting aside 30% isn't probably enough. As a "self employed" person, you are responsible for paying income taxes, social security taxes, payroll taxes. And don't forget to set some more aside for your state taxes! Your state may also have an occupational tax (e.g., taxes levied simply for practicing a profession -- nice, eh?).

Typically, you figure out what your total state and federal tax liability at the beginning of the year, then work out what you have to pay each quarter to make that total amount. And, as a self employed person, you get the distinct honor of filing TWO tax returns on April 15. One for the previous year, and another for the first quarter of the current year.

I don't pay any taxes at all.