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Last edited by Joplin; 10-01-2008 at 04:22 PM.





Several issues apply ...
first, there are separate calculators for income tax and for self-employment tax. At a typical self-employment tax rate of 15.3%, your $5423 first quarter income would result in a self-employment tax liability of $829
next, if using an 'annual' income tax calculator program you need to multiply your first quarter income by a factor of four to arrive at the estimated tax for the whole year ... and then divide that amount by four to arrive at your first quarter estimated tax payment. However, as you already found out, your income tax liability at your present earnings level is extremely low i.e. $7. Of course this assumes that you can claim yourself as a dependent on your 2008 tax return (i.e. that your parents will not be claiming you ... because if they do your own income tax liability will be significantly higher like 10%)
Besides your 2007 tax return, you do need to file a form 1040-ES and send the IRS a check for $836 in estimated tax payment by this coming April 15th (unless of course your parents will be claiming you as a dependent on their 2008 tax return, in which case you need to send an estimated tax check for $829+$542=$1,361 ).
Also keep in mind that as a student and a dependent, any student grants / loans that you are getting are based on an eligibility application that includes both your parents' income and your own income i.e. 'household income'. If it turns out that your 4 * $ 5,423 = $21,500 in estimated 2008 dancing income, plus your parents' 2008 income, puts you above the eligibility threshold, you may wind up having to pay back any student grant / loan money that you have received but were not actually entitled to. Also, since the IRS now automatically shares information with your college's bursar's office plus student grant / loan agencies, there is no way to 'cheeze' the student grant / loan application since the IRS will match up your own social security number with your own tax return, with your parents' tax return, and with the 'household income' info provided on your student loan / grant application. Any major discrepancy is highly likely to get you and your parents audited, as well as prompting an inquiry by the student grant / loan agency.
Also, depending on what your parents' income actually is, your $21,500 in estimated 2008 dancing income may make you ineligible for dependent status on your parents' 2008 tax return based on the 51% rule whether you allow them to claim you as a dependent or not. This will actually reduce your own income taxes to almost nothing, but it may significantly increase the amount of income taxes that your parents will have to pay. In fact, depending on your parents' income / tax bracket and the amount of your tuition cost, your working as a dancer may actually wind up costing your parents more in additional taxes than you are earning (net of SE tax) as a dancer !
As the student loan / grant application's 'household income' requirement will inexorably tie your own earnings and taxes to your parents' earnings and taxes, you really need to sit down with them regarding the fact that you will have an estimated $21,500 in earnings during 2008. They really need to know what is going on because it will potentially affect your student loan application, your parents' tax withholding etc.
I'll also add that it's no secret that many girls that are both student loan / grant receiving college students as well as fairly profitable dancers choose to avoid the issue altogether by simply 'forgetting' to report their dancing income. However, this not only opens the door to the girl eventually being pounced by the IRS should her dancer earnings ever turn up as part of an IRS investigation ( recent example Scores in NYC which investigated the clubowners for tax evasion, and in turn gained access to the club's 'dancer employment applications' and work schedules). Because of the 'household income' student loan application tie in, it could also open up the possibility of the girl's parents also being pounced on by the IRS as well as the student loan / grant agencies wanting their loan / grant money paid back immediately.
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Last edited by Melonie; 03-23-2008 at 07:12 PM.





^^^ yes technically speaking they could disallow your 2008 spring semester grant money. However, the odds are extremely low that they would bother to go back a year based on 2008 tax returns filed in 2009 affecting grant applications approved and paid in 2007.
Dinkytown also has a self-employment tax calculator at in addition to the income tax calculator that you used.
As I mentioned earlier, to arrive at your estimated taxes you need to add together the results of both the income tax and self-employment tax calculators.
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