1099 income tax/401k help

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Topic Author
wildcat16
Posts: 11
Joined: Mon Dec 06, 2021 6:54 pm

1099 income tax/401k help

Post by wildcat16 »

I have a high paying W2 position, but am going to pick up some work 1099 on the side. Have setup a separate checking and credit card for expenses to make it easier to track any expenses. The side pay will likely vary significantly from quarter to quarter (for example like ~50k first quarter, and probably only 15k second quarter, etc.).

1) Any recommendations for calculators to easily calculate tax? (from what I have read due to my high income I need to make sure I pay over my tax and not under shoot it).
2) Have been trying out some software to easily track this, and "quickbooks self employed" seems to do a pretty nice job of setting this up (and even estimating quarterly taxes), however I am not sure how accurate these are so would like to make sure I have a trusted way to calculate (or software that will do this).
3) My current employer W2 position I have maxed out my 403B, so I would be looking to put the 25% of 1099 pay (or 20% of net earning) to maximize the pre tax investment. What is the best way to go about this with variable income (aka put in 25% of each pay, 25% quarterly when I get my taxes, or wait until year end to put the money into a 401k)
4) What is the best way to divide deductions for mixed items such as wifi/cell phone/computers, etc (for example my family cell plan is personal, but I will be expected to be on call when I am 1099 pay and required to have my own phone, will need a new PC laptop for their software but I currently only use Mac, need internet access, etc). Do you wait until end of year and claim the deduction (aka 25% of phone for business/75% for personal), or do you do a monthly transfer from the "business checking" to my "personal checking" when expenses come up to make it easier to track at end of year.
5) I use turbotax for personal taxes, and considering quickbooks self employed as it links together and continuing to do my own, but will have a CPA look over my finances this year for any glaring issues and make sure everything looks ok. But are there any other options folks would recommend (tracking mileage, 1099 income, expenses, and quarterly taxes is all I'm looking to do).

Am excited for the 1099 income, and the possibility of some extra pre-tax investment space and some tax savings. Hoping things work out to hopefully cut back a bit on my W2 job and supplement with 1099 as it will give me a bit more work/life flexibility in scheduling and travel.

TIA.
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Eagle33
Posts: 2392
Joined: Wed Aug 30, 2017 3:20 pm

Re: 1099 income tax/401k help

Post by Eagle33 »

You could increase your W2 withholding to cover your 1099 income, at least on a safe harbor basis to eliminate the need for estimated tax payments. Since you say you are high income W2, then withhold at least 110% of the total tax from previous year's 1040. This will prevent an underpayment penalty. Though you will have to settle up with any extra taxes owed at time of filing 1040, so don't spend all your 1099 income.
pizzy
Posts: 4339
Joined: Tue Jun 02, 2020 6:59 pm

Re: 1099 income tax/401k help

Post by pizzy »

Eagle33 wrote: Tue Dec 07, 2021 1:19 pm You could increase your W2 withholding to cover your 1099 income, at least on a safe harbor basis to eliminate the need for estimated tax payments. Since you say you are high income W2, then withhold at least 110% of the total tax from previous year's 1040. This will prevent an underpayment penalty. Though you will have to settle up with any extra taxes owed at time of filing 1040, so don't spend all your 1099 income.
Agree with you about the 110%, but a few estimated payments to cover the gap between withholding and 110% * last years tax is much easier that trying to adjust withholding precisely.
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Topic Author
wildcat16
Posts: 11
Joined: Mon Dec 06, 2021 6:54 pm

Re: 1099 income tax/401k help

Post by wildcat16 »

pizzy wrote: Tue Dec 07, 2021 1:22 pm
Eagle33 wrote: Tue Dec 07, 2021 1:19 pm You could increase your W2 withholding to cover your 1099 income, at least on a safe harbor basis to eliminate the need for estimated tax payments. Since you say you are high income W2, then withhold at least 110% of the total tax from previous year's 1040. This will prevent an underpayment penalty. Though you will have to settle up with any extra taxes owed at time of filing 1040, so don't spend all your 1099 income.
Agree with you about the 110%, but a few estimated payments to cover the gap between withholding and 110% * last years tax is much easier that trying to adjust withholding precisely.
Had not considered this. Sounds like maybe increasing W2 holdings and a slightly smaller 1099 quarterly payment might get me closer to actual and save the big end of year bill. Also, quarterly payments probably makes it easier to invest into 401k throughout the year having taxes accounted for.

But as to the initial questions…any software or calculators recommended for these calculations.
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