{"id":23,"date":"2022-05-17T17:07:59","date_gmt":"2022-05-17T17:07:59","guid":{"rendered":"https:\/\/www.hst-tag.com\/blog\/?p=23"},"modified":"2022-04-11T17:09:45","modified_gmt":"2022-04-11T17:09:45","slug":"starting-a-side-gig-in-2022-your-new-tax-obligations","status":"publish","type":"post","link":"https:\/\/www.hst-tag.com\/blog\/starting-a-side-gig-in-2022-your-new-tax-obligations\/","title":{"rendered":"Starting a Side Gig in 2022? Your New Tax Obligations"},"content":{"rendered":"<p><img decoding=\"async\" loading=\"lazy\" class=\"size-medium wp-image-24 alignleft\" src=\"https:\/\/www.hst-tag.com\/blog\/wp-content\/uploads\/2022\/04\/56386739-300x226.jpg\" alt=\"business woman working\" width=\"300\" height=\"226\" srcset=\"https:\/\/www.hst-tag.com\/blog\/wp-content\/uploads\/2022\/04\/56386739-300x226.jpg 300w, https:\/\/www.hst-tag.com\/blog\/wp-content\/uploads\/2022\/04\/56386739-768x578.jpg 768w, https:\/\/www.hst-tag.com\/blog\/wp-content\/uploads\/2022\/04\/56386739-1024x771.jpg 1024w, https:\/\/www.hst-tag.com\/blog\/wp-content\/uploads\/2022\/04\/56386739.jpg 1997w\" sizes=\"(max-width: 300px) 100vw, 300px\" \/>It\u2019s not just self-employed individuals who must pay estimated taxes. Here\u2019s what you need to know.<\/p>\n<p>W-2 income tax withholding isn\u2019t perfect. You\u2019ve probably had years when you owed more than you expected to on April 15. Or you were pleasantly surprised to receive a sizable refund. The idea, of course, is to try to come out as even as possible. You can usually do this by adjusting your withholding when you experience a life change like taking on a mortgage or having a baby.<\/p>\n<p>Income taxes are also pay-as-you-go for self-employed individuals \u2013 or at least they should be. If you\u2019re striking out on your own by starting your own small business in 2022 or you\u2019re simply taking on a side gig to improve your finances, your tax obligation will change dramatically. Your income will not be subject to employer withholding every week or two. In most cases, you\u2019ll get it all. But the IRS expects you to pay estimated taxes on that income four times a year.<\/p>\n<h2>Who Else Must Pay?<\/h2>\n<p>There are other situations where you\u2019ll be expected to make quarterly payments. In fact, the only individuals who aren\u2019t required to pay estimated taxes (besides W-2 employees whose withholding is on target) are those who meet all three of these conditions:<\/p>\n<ul>\n<li>You owed no taxes the previous tax year (line 24 on your 2021 1040\u2014<strong>total tax<\/strong>\u2014is zero, or you weren\u2019t required to file a return).<\/li>\n<li>You were a resident alien or U.S. citizen for all of 2021.<\/li>\n<li>Your 2021 tax year covered a 12-month period.<\/li>\n<\/ul>\n<p><img decoding=\"async\" src=\"https:\/\/www.hst-tag.com\/images\/image_library\/articles\/Tax-Jan2022-img1.jpg\" alt=\"tax tips\" \/><\/p>\n<p><span style=\"font-size: 10pt;\"><em>You\u2019ll find your total tax for 2021 on line 24 of the Form 1040. Notice, too, that line 26 asks for 2021 estimated tax payments.<\/em><\/span><\/p>\n<p>There are numerous situations where individuals who have payroll taxes regularly withheld on their income may still be required to submit quarterly estimated taxes. For example, did you receive income from rents or royalties? Dividends or interest? Income from selling an asset? Gambling?<\/p>\n<p>If you have an employer who withholds taxes, but you don\u2019t think you\u2019ll be paying enough given the deductions and credits you might receive, you need to plan for estimated taxes. Self-employed individuals are almost always required to submit them.<\/p>\n<h2>Special Rules for Some<\/h2>\n<p>As with all things IRS, there are many exceptions to the rules regarding estimated taxes. For example, there are special rules for:<\/p>\n<ul>\n<li>Fishermen and farmers.<\/li>\n<li>Some household employers.<\/li>\n<li>Certain high-income taxpayers.<\/li>\n<li>Nonresident aliens.<\/li>\n<\/ul>\n<h2>How Do You Estimate Your Quarterly Taxes?<\/h2>\n<p>That\u2019s the hard part, especially if you\u2019re new to the world of estimated taxes. There is no magic formula, no way to calculate to the penny what you\u2019ll owe. You\u2019re basically making an educated guess. Since you won\u2019t know for sure what changes to the tax code will be put in place until the end of the year, you can\u2019t be absolutely certain that you might get a particular credit or deduction.<\/p>\n<p>But you know roughly what your income will be for a given quarter once you\u2019re nearing the end of it. Do you have a lot of business-related expenses? Keeping track of those is critical, as they\u2019ll offset your income. If you don\u2019t, you\u2019ll have to budget for a heftier quarterly payment. And you must keep in mind that you\u2019ll be paying self-employment tax \u2013 that portion of your income taxes that your employer used to pay.<\/p>\n<p>Once you\u2019ve been self-employed for a full tax year and have seen what your tax obligation was, it will be easier to estimate in subsequent years. But you may have a difficult time your first year.<\/p>\n<h2>How Do You Pay Estimated Taxes?<\/h2>\n<p><img decoding=\"async\" src=\"https:\/\/www.hst-tag.com\/images\/image_library\/articles\/Tax-Jan2022-img1.jpg\" alt=\"tax tips\" \/><\/p>\n<p><span style=\"font-size: 10pt;\"><em>Individuals and business that had to pay estimated taxes in 2021 submitted the Form 1040-ES four times. If you\u2019re self-employed in 2022, you\u2019ll need to submit similar vouchers with your payments, unless you\u2019re paying online.<\/em><\/span><\/p>\n<p>If you\u2019re self-employed and you anticipate owing $1,000 or more in taxes on your 2022 income, you\u2019ll need to file quarterlies using IRS Form 1040-ES vouchers (available on the IRS website) along with a check or money order. There are also ways to pay online using a credit or debit card or direct bank withdrawal. Corporations would file the Form 1120-W if they expect to owe $500 or more.<\/p>\n<p>Estimated taxes for the 2022 tax year are due:<\/p>\n<p>April 18, 2022 (January 1-March 31, 2022)<\/p>\n<p>June 15, 2022 (April 1-May 31, 2022)<\/p>\n<p>September 15, 2022 (June 1- August 31, 2022)<\/p>\n<p>January 16, 2023 (September 1-December 31, 2022)<\/p>\n<h2>A Challenging Task<\/h2>\n<p>Estimated taxes are not precise. And it may be difficult to set aside money for them if your income is not where you\u2019d like it to be. But as you might expect, the IRS will levy penalties on you if you don\u2019t.<\/p>\n<p>Year-round tax planning can help you in this critical area. We\u2019ll be happy to set aside time to consult with you about estimated taxes. We\u2019re also available to do tax preparation and to look at how your taxes fit into your overall financial situation. Contact us soon to get a jump on the 2022 tax season &#8212; or to finish up 2021.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>It\u2019s not just self-employed individuals who must pay estimated taxes. Here\u2019s what you need to know. W-2 income tax withholding isn\u2019t perfect. You\u2019ve probably had years when you owed more than you expected to on April 15. Or you were pleasantly surprised to receive a sizable refund. The idea, of course, is to try to [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":""},"categories":[],"tags":[],"_links":{"self":[{"href":"https:\/\/www.hst-tag.com\/blog\/wp-json\/wp\/v2\/posts\/23"}],"collection":[{"href":"https:\/\/www.hst-tag.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.hst-tag.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.hst-tag.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.hst-tag.com\/blog\/wp-json\/wp\/v2\/comments?post=23"}],"version-history":[{"count":1,"href":"https:\/\/www.hst-tag.com\/blog\/wp-json\/wp\/v2\/posts\/23\/revisions"}],"predecessor-version":[{"id":25,"href":"https:\/\/www.hst-tag.com\/blog\/wp-json\/wp\/v2\/posts\/23\/revisions\/25"}],"wp:attachment":[{"href":"https:\/\/www.hst-tag.com\/blog\/wp-json\/wp\/v2\/media?parent=23"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.hst-tag.com\/blog\/wp-json\/wp\/v2\/categories?post=23"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.hst-tag.com\/blog\/wp-json\/wp\/v2\/tags?post=23"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}