i know as an "independent contractor" you are supposed to pay every 3 months or so, how do dancers pay taxes(my club did not give me any tax papers)
also is it tax on what you make, or net income(income after expenses)?
thanks!![]()
i know as an "independent contractor" you are supposed to pay every 3 months or so, how do dancers pay taxes(my club did not give me any tax papers)
also is it tax on what you make, or net income(income after expenses)?
thanks!![]()





please read the 'So Many Tax Forms' sticky thread at the top of the page.
Very briefly, 'independent contractors' file one annual tax return just like employees do. However, where employees 'pay' estimated taxes to the IRS out of every paycheck which is withheld and sent to the IRS by their employer, 'independent contractors' must withhold estimated tax money and send it to the IRS themselves. To simplify the amount of paperwork, 'independent contractors' are allowed to only do this quarterly, as opposed to employers doing this monthly ( or more frequently ) for their employees based on their employee paycheck issuance pay period.
When the annual tax return is filed, for both employees and 'independent contractors' it basically amounts to the same end result ... calculating actual taxes due, and 'balancing' the amount of actual taxes owed versus the amount of estimated taxes already paid. If total estimated tax payments exceed actual tax liability ( which is usually the case for employees ) the difference is refunded. If the estimated tax payments fall short of actual tax liability ( which is often the case for 'independent contractors' ) an additional tax payment must be sent in.
So the answer to your question, in terms of how often do 'independent contractors' need to send the IRS a check for tax money, is either four or five times per year ... depending on whether or not one quarterly estimated tax payment filing can be combined with the annual tax return filing.
^^ What is the penalty for just doing it annually? I've read online that you can just file it all together at the end of the tax year, and pay a penalty which actually wasn't even that much?





Taxpayers many times are required to make estimated IRS tax payments for income earned on a quarterly basis (4/15, 6/15, 9/15, and 1/15). For 2012, 4/15 is now 4/17. If you are self-employed, or have a side business as a W-2 employee, you could be responsible for estimated quarterly payments. If you fail to make these payments, an underpayment penalty is incurred. This penalty is calculated quarterly with an interest penalty applied to the underpayments. The charge accrues until the amount is paid or till the due date of the return (whichever comes first). In order to avoid this penalty, you can pay 90% of your total tax liabilities on your tax return, or 100% (110% percent if your AGI was more than $150k) of the taxes paid last year (whichever is less). In most cases, if you underpaid by less than $1k (after deducting withholdings and credits) you will avoid this penalty* To calculate any underpayment use Form 2210, Underpayment of Estimated Tax By Individuals. With many penalties, realize you can abate them or eliminate them in many cases if you can prove reasonable cause. Also note, that this penalty is not tax deductible.
HTH
Z





Zofia has covered the technicals. What it means in terms of additional dollars is ( a current ) 6% on the underpaid estimated tax amount ( accruing from the quarterly filing date upon which the estimated tax payment was due ), plus a potential 10% penalty charge on top of the interest charge, plus of course the estimated tax payments themselves.

The underpayment penalty (really an interest charge) is currently running at an annualized 3%. So for example, on a quarterly payment due of $2,000. that was due in Sept. but wasn't made until April (7 mos. late) one would owe 1.75% X 2,000 = $35. That's only for one of the four estimated payments required. That's also assuming the amount due was paid in full by April 15. Late payment and other charges for amounts due by the annual 1040 filing deadline of April 15 accrue at a higher rate after that date. As noted correctly above, these penalties are not deductible. Also, many states will require quarterly estimates, and have their own rules and rates.
Zofia can confirm the accuracy of the above for us, hopefully. Also, whether a further 10% penalty may apply (assuming amount due is paid by 4/15). I've never been charged it in many years of estimated tax underpayments and I don't believe it applies.
The most pertinent consideration for dancers is to have sufficient funds set aside to pay the full amount due on or before 4/15. If making the quarterly estimated payments in a timely manner helps assure that amounts due are paid by 4/15, then it's certainly valuable to do so.
HTH.
James





The IRS interest charge does in fact get reset quarterly. The 10% penalty can be applied at IRS discretion, and typically IS applied in cases where 'wilful disregard' of IRS tax compliance requirements has resulted in substantial under-reporting of income thus substantial unpaid estimated taxes.





That doesn't make any sense though. How do you KNOW how much you're going to make though? What if you're chronically ill and don't know how much you'll be able to work? What if you start working at an amazing club or start camming on a new site and make way more money? You get penalized for making more than you thought you would?!





^^^ you don't get penalized if you 'adjust' your next quarterly estimated tax payment accordingly










^^^ just to be clear regarding official IRS terminology, the interest rate on unpaid estimated ( and other ) taxes is currently an annualized 3%, but is periodically reset based on changes in FED funds rate, prime rate etc. This interest charge applies to all taxes which remain unpaid beyond their filing / payment deadline.
The PENALTY charge has been and remains 10%. Granted that assessment of the penalty charge is at the discretion of the IRS, with assessment of the penalty charge typically being linked to the IRS perceived 'intent' of the taxpayer's estimated tax underpayment(s). Arguably, if the taxpayer's IRS perceived 'intent' was to wilfully under-report their estimated income with the intent of avoiding taxes, assessment of the 10% penalty is a 'half-way' step toward punishing the taxpayer ... which is far easier to implement and far less problematic for the IRS than bringing tax fraud charges.





Bumping this because I have a question on the underpayment penalties..
I did not pay my quarterlies this year, except for the 1/15 one I'm sending tomorrow, which is for about 40% of the tax due. I figured there'd be a penalty so I am looking at Form 2210, but the language is confusing. I did not check any of the boxes in Part 2; I am not messing with the annualized income installment method or any attempt to get the penalty waived, it was literally just me being too lazy to send the checks. From what I am gathering, I'm required to compute the penalty, write it on my 1040, pay it, but not actually file Form 2210.
Can anyone clarify if this correct? It seems odd to not have to actually file the form.
"People jack off with the left hand and point with the right."
"You can check out any time you like, but you can never leave."
I feel like I've been dragged all over the place of whether its okay to do taxes yearly instead of quarterly. Some people say "I think you can do either if you're a business.." or "We do our taxes yearly as a business and haven't had any issues." I can't get the point across when I've expressed how important it is filing quarterly but, often get told I'm wrong. Now there are fees for not paying quarterly, so which is it?![]()





In your first year of business, you can get by without filing quarterly. After that, you run the risk of a penalty if you fail to file and you owe taxes. Worse, if you have employees and fail to forward the withholding, or fail to withhold at all you are looking at criminal penalties. Let's face it, filing your taxes is a part of being in business. Anyone says it isn't is either fooling themselves, or trying to fool you. Either way, you don't want to be the fool. The Service is no pushover when it comes to protecting the revenue.
HTH
Z
Ya, it definitely depends on how much you make vs deductions. Personally, I don't file quarterly because I don't make piles of money, am married, and have 2 dependents. I still get a small yearly return. However, on the same income, if I didn't have dependents or was married I would need to file quarterly because I would owe.
Whenever you aren't sure, you're better off just paying quarterly. Better to be safe than sorry when it comes to the IRS.




In 25 years I have only sporadically paid quarterlies, penalties are not that significant, i would rather have the money at my disposal than in the gov'ts hands
They don't get mad, as long as you pay by the 15th





^ That's what I figured. I think the multiplier was about 2 cents/dollar owed.
I could write them a check for ALL of last year's tax right now and get the 'safe harbor' payment bit, but I'd rather pay the $20 penalty and sit on that money until April in case I need it.
"People jack off with the left hand and point with the right."
"You can check out any time you like, but you can never leave."
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