p_robb1960[at]hotmail.com (Peter) writes:

- quote -

You have two issues: whether estimated tax payments are
required, and how much money you'll have to pay (whenever)
to cover the unplanned income. You already seem to have a
handle on the latter.

See IRS Publication 505, paying special attention to the
safe harbors from the estimated tax penalty. It may be that
your withholding will be sufficient to avoid any penalty
regardless of how much you owe come next April.

Phil Marti
Topeka, KS

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I have a question on paying estimated taxes. I work as an
employee and have federal & state taxes withheld. My wife
started a job in February for a very small firm which
consists of the two owners. My wife is the only 'employee';
she is being paid as an independent contractor, although she
really isn't (there is no witholding, and they are paying
her an additional 7.5% or so to cover the extra FICA).

The owners are friends of hers and she hesitates to
jeopardize the position or them. The assignment was to last
a few months, and earlier in the year I calculated that my
withholding would be enough to cover our federal tax
requirement (we file Married filing joint), plus the
self-employment taxes she would owe, so we didn't send in
any estimated taxes. Now the assignment has continued past
the original date, and we are unsure as to how long it may
go on. What is the best way to figure out any estimated
taxes we may owe for the remainder of the year? Using
1040ES? The instructions for form 1040ES mention using an
annualized income installment method (described in Pub. 505)
for a change in income which occurs after March 31, which
appears to apply in our situation. Is there any penalty
because we didn't make any estimated tax payments earlier in
the year?

Thanks, Pete.

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