2009 Tax Refund Estimate

Question: Do I have to pay estimated taxes?

I’m self employed, my total tax for 2008 (1040 line 44) was $0, and while I did have to pay self employment tax, various after tax credits added to more than I owed (ie. I got a refund). In that case, am I required to pay estimated taxes for 2009? If I don’t and credits don’t happen to exceed my self employment tax, will I have to pay a penalty?

Answer: I had this happen once. If your estimated payments equal or exceed your previous year liability then there is not suppose to be a penalty BUT if your previous year liability or estimated payments was $0 then they don’t honor that rule.

It would be better to play it safe and pay in something every quarter or at least during the first quarter to cover what you estimate.

Also IF you paid self employment taxes, those taxes ARE part of your tax liability and unless they are covered by taxes withheld from an employer on another job, you could be penalized for not making quarterly payments to cover the self employment taxes.

I had over $8000 in self employment earnings last year but I also had a job that payed $30,000. At my job I claim zero dependents and single status but on my return I file as married Filing Jointly with 2 dependents so the extra taxes withheld from my pay at my job are more than enough to pay my income and self-employment taxes from my sideline businesses. In fact I expect a sizable refund.

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