Self-employed tax estimates? Confusing!

[olivia77 23]

Hi everyone,

 

I've been moving through different threads as my immigration process moves forward and it's been incredibly helpful to see all the information on VisaJourney.

 

I am already thinking about the tax return for the year 2022: do I have to pay self-employed tax estimates quarterly? I can't seem to find a straightforward answer on IRS forms/ website.

 

I came to the US at the end of September 2021 after leaving my job in the UK. For the rest of 2021, I had no income. I did not file anything for 2021, and my USC husband  has just filed his 2021 return as "married filling separately". 

 

This year, I've started freelancing and want to make sure I know what to do next. I had no income so far during the Q1 but I expect to have income from both foreign and US clients in 2022.

 

On the IRS website, it states:

foreign persons classified by the IRS as: resident aliens who meet the green card test or the substantial presence test in the current year; nonresident aliens who have not met the green card test or the substantial presence test.

 

My AOS from K1 is pending so at the moment I am a non-resident alien. However, I expect that status to change either after substantial presence test is met towards the end of 2022 or when the GC is issued (whichever comes first).

 

My question is: what do I do about self-employed tax estimates and the quarterly payments? Do I wait until I meet the substantial presence test? Or do I pay an estimate for Quarter 2?

I have never filed a tax return in the US nor had US income, and it's a new consulting business so I can only pull estimates out of my head and adjust along the way.

 

Thanks

 

Edited April 19, 2022 by olivia77
typo

[JeanneAdil 6,514]

https://www.irs.gov/businesses/small-businesses-self-employed/self-employed-individuals-tax-center

 

[Wuozopo 4,293]

36 minutes ago, olivia77 said:

My question is: what do I do about self-employed tax estimates and the quarterly payments? Do I wait until I meet the substantial presence test? Or do I pay an estimate for Quarter 2?

I have never filed a tax return in the US nor had US income, and it's a new consulting business so I can only pull estimates out of my head and adjust along the way.

Did you get a SSN when you arrived on a K1? You’d need that to make an estimate.

 

Here’s some concepts to consider. 
As self employed, nobody is holding out tax, Social Security, or Medicare out of your check. The IRS doesn’t want it to be paid at the end, so you pay a bit along the way. The form has some worksheets to help you but I find it most difficult to even guess what my self employment is going to be each year.  https://www.irs.gov/pub/irs-pdf/f1040es.pdf
 

I’m assuming you will file jointly with your spouse for 2022. In that case the IRS looks at your joint incomes as one pot of money earned and the tax paid in as one joint pot of money. So if your husband tends to have excess taken out of his check and gets a refund, his excess covers the taxes your self employment will generate. You do not have to match a contribution by estimate in your name that exactly covers your taxes. It’s a joint venture where he can cover you. And there’s leeway where you as joint filers just have to get close. He can bump up what’s taken out of his check. He can send in some extra with a 1040-ES under his SSN if you didn’t get one. Or you can let it ride if he is getting thousands in refunds already that will cover you. Of if you have a SSN, you can make the estimate payment  and just pick an amount like $500 and wait to figure it out as you see how the business is going. Send more or even less for the next estimate date. If you send too much, it comes back as refund. 
 

Once you file your first return with self-employment, you might get a better idea for what to do for the next year. 

The due dates for estimates:

1st payment  April 18, 2022  

2nd payment  June 15, 2022

3rd payment  Sept. 15, 2022 

4th payment Jan. 17, 2023

 

[olivia77 23]

21 hours ago, Wuozopo said:

Did you get a SSN when you arrived on a K1? You’d need that to make an estimate.

 

Here’s some concepts to consider. 
As self employed, nobody is holding out tax, Social Security, or Medicare out of your check. The IRS doesn’t want it to be paid at the end, so you pay a bit along the way. The form has some worksheets to help you but I find it most difficult to even guess what my self employment is going to be each year.  https://www.irs.gov/pub/irs-pdf/f1040es.pdf
 

I’m assuming you will file jointly with your spouse for 2022. In that case the IRS looks at your joint incomes as one pot of money earned and the tax paid in as one joint pot of money. So if your husband tends to have excess taken out of his check and gets a refund, his excess covers the taxes your self employment will generate. You do not have to match a contribution by estimate in your name that exactly covers your taxes. It’s a joint venture where he can cover you. And there’s leeway where you as joint filers just have to get close. He can bump up what’s taken out of his check. He can send in some extra with a 1040-ES under his SSN if you didn’t get one. Or you can let it ride if he is getting thousands in refunds already that will cover you. Of if you have a SSN, you can make the estimate payment  and just pick an amount like $500 and wait to figure it out as you see how the business is going. Send more or even less for the next estimate date. If you send too much, it comes back as refund. 
 

Once you file your first return with self-employment, you might get a better idea for what to do for the next year. 

The due dates for estimates:

1st payment  April 18, 2022  

2nd payment  June 15, 2022

3rd payment  Sept. 15, 2022 

4th payment Jan. 17, 2023

 

Hi @Wuozopo, thanks so much! Really insightful as always and gave me a few things to consider. Yes, I got a SSN as soon as I arrived here. 

[Wuozopo 4,293]

On 4/19/2022 at 9:41 AM, olivia77 said:

I came to the US at the end of September 2021 after leaving my job in the UK. For the rest of 2021, I had no income. I did not file anything for 2021, and my USC husband  has just filed his 2021 return as "married filling separately". 

I wanted to comment on this even though it was not your question.  Your husband did not have to file Married Filing Separately for 2021. Filing jointly almost always results in less taxes/more refund, even reporting your UK earned income. Points to consider.

• You can be treated as a resident alien for tax purposes by the IRS by writing a statement electing to be. You both sign. I’ve posted a sample on here before. Than you file jointly with the same benefits of any resident alien.
• Your UK income would be reported, but also excluded from taxation using Form 2555 Foreign Earned Income Exclusion.
• Your joint tax return would qualify for a standard deduction of $25,100 instead of $12,550 that your husband got filing separately. With your income excluded, that extra deduction essentially reduces his income for tax  even more. Less taxable income means less tax.
• The tax rate for Married Filing Jointly is lower than MFS.
• You would qualify for your share of the economic impact payment #3. He probably got his early in 2021, but you didn’t. Because you are a “resident alien for tax purposes”, have a SSN, and are on the return, your $1400 payment would be issued as a tax credit (refund).

He can amend his 2021 tax return. He basically reworks the entire return as joint including claiming your $1400 credit on Line 30. Then using that new return information to complete a 1040x, which is the actual amended return. There are columns to fill out that show previous return numbers, new return numbers and the difference. (That’s why you do a new “start from scratch return” so you know what the new numbers are). He should think about that because it could be worth thousands to him. This first year married to you is the only year you are going to get all these extra benefits of no tax on your income but the extra standard deduction of $12,550 and the $1400 credit for your economic impact payment #3.