General Question

jm5225's avatar

1099 vs. w4 wages - can my taxed money make up for the untaxed?

Asked by jm5225 (253 points ) September 11th, 2010

From January 2010-August 2010 I was a 1099 employee with no taxes taken out of my check. Normally I would pay them at the end of the year. I got a new job and am now W4 or whatever you call it…I am taxed and claimed 0 so they take the most out of my check(I think). I got my first check and frowned when I saw how much taxes were taken out. Will the taxes they take out help cover what I will owe at the end of the year?

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7 Answers

jrpowell's avatar

You did the right thing by claiming zero. But I’m afraid that Isn’t always enough to cover what you will owe. I would really suggest talking to an account (they are cheap this time of year) and let them crunch some numbers. This wouldn’t take them long and would be pretty cheap.

Without knowing numbers this is impossible to estimate.

woodcutter's avatar

you probably should have been paying your taxes on that 1099 money in quarterly pmts. Then it won’t feel like such a hit at tax time. Hopefully if you spent any of the self employed money on anything job related you kept all the receipts. Those expenses should help offset some taxes owed. Did you use your car, cell phone, buy tools or supplies?

llewis's avatar

As @johnpowell said, go to an accountant – although I would recommend one that specializes in taxes. Tax preparers like H&R Block have a few offices that are open all year, so look for a district office or premium office.

Taxes are due as the income is earned, contrary to popular belief, and penalties and interest are calculated accordingly (based on when the quarterly payment would have been due), so the sooner you can get the money paid in, the less you’ll have to pay later in penalties and interest. There is a minimum amount of tax that triggers the penalties (quote from IRS website: Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller.), but just to be sure, check with a tax preparer.

When I did taxes, some of the biggest messes I cleaned up were from CPAs who thought they knew taxes, so that’s why I recommend going to a tax specialist.

cazzie's avatar

Yes, all of your income will be taxed and what wasn’t withheld the first part of the year, you will still owe. If you have extra taken out of your new W4 that will help when you file your end of year return. You weren’t making ANY tax payments during the time you we a 1099? I don’t know the intricacies of the US system, but that sounds odd. If you were a 1099, there would be some of your own expenses that you can claim against the income too?

I don’t know how you qualified for ‘non withholding’ status, but that income is still taxable and you should have been putting a percentage of it aside to be paid at the end of what ever contract you had.

I did accounts for some contractors in New Zealand before they changed some of the rules for ‘self employed contractors’. Changes to the employment act had to be made for the very reason that suddenly there were large groups who didn’t have withholding tax taken out of their income like regular employees and they got into the shit, exactly like you are now, if you don’t bite the bullet and make sure you don’t end up owing thousands at the end of the year.

Yeah, get the numbers checked so you can prepare yourself.

LuckyGuy's avatar

First, don’t panic. If you do your own taxes, you don’t need a tax prefessional to help you answer this. You can do it yourself easily.
Subtract off all the expenses related to the 1099 work from the 1009 wages to get 1099 gross.
Add your 1009 gross to your expected W-2 gross wages to get your annual gross. Subtract off the deductions you usually have (look at last year)
Look at the the tax tables for last year to predict how much tax you will owe. This will get you close. The real numbers are not cast in stone yet.)

Now, by claiming 0 dedctions you are haviing more tax taken out every pay period . See how much is taken every pay period and multiply by the number of pay periods left until the end of the year.
Are you close? Probably.
If not, then request to have more withheld.
Just make sure you pay what you owe.

Ron_C's avatar

I’ve been in that situation. I hope you saved you 1099 money because you are going to need about 25% of it to pay this year’s taxes both state and local. By the way states are becoming less forgiving than the federal government.

perspicacious's avatar

There is no way to say. If your withholding is more than adequate for your W4 wage tax liability, yes, the rest will go toward your 1099 tax due.

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