Q: I work 1 month/yr as an independent contractor. Must I pay quarterly estimated taxes? Or just the quarter I work?
This 1 month job is my only income. I do this job in the US as a US citizen, but most of the year I live abroad with no income. I missed the January payment.... What is the correct way to pay taxes for this income?
A:
The rule for estimated payments is as follows:
If a taxpayer is required to pay estimated payments they will owe a an underwithholding penalty it they do not pay estimated taxes. They can avoid this penalty if they owe less than $1,000 in tax (after any withholdings or credits) or if they paid withholding and estimated tax of at least 90% of the tax for the current year or 100% (110% if your previous years taxes were more than $150,000) of the tax shown on the return for the prior year, whichever is smaller. There are special rules for fisherman and farmers.
You can also use the annualized income installment method. This can be complex and it would likely be in your best interest to have an accountant help you prepare it.
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