1. TurboTax /
  2. Tax Calculators & Tips /
  3. Tax Tips Guides & Videos /
  4. IRS Tax Forms /
  5. Myths About Quarterly Taxes for the 1099 Tax Form

Myths About Quarterly Taxes for the 1099 Tax Form

Updated for Tax Year 2017


OVERVIEW

For those Americans who pay quarterly taxes—or those who don't but who think they should—understanding the rules governing estimated taxes is vital.


Two women using a laptop computer

Paying taxes is never a fun prospect—and paying estimated taxes, depending on your level of income, generally adds to the stress and can reach an unsettling degree of complexity.

For those Americans who pay quarterly taxes—or those who don't but who think they should—understanding the rules governing estimated taxes is vital, experts say.

Thomas Jensen, managing partner of Portland, Oregon-based Vaerdi Financial, and Sandy Zinman, founder of Zinman Accounting in White Plains, New York, dispel some of the myths surrounding quarterly tax payments and IRS Form 1099-MISC.


A misconception is that if you miss a payment by a couple of days, then you should just wait until your next payment is due. This is incorrect.

—Sandy Zinman, founder of Zinman Accounting, White Plains, New York


Do you owe estimated taxes?

The most important detail to understand, Jensen says, is how much and what type of income places you in the position of paying estimated taxes. You generally have to make estimated tax payments if you expect to owe tax of $1,000 or more when you file your return. Estimated tax payments are made on a quarterly schedule established by the IRS.

It is the self-employed who normally must pay quarterly estimated taxes, although individuals who receive large, untaxed windfalls—from investment gains from stocks for example—may also be required to pay estimated taxes.

Many people misunderstand Form 1099-MISC income, Jensen says. He believes this is the No.1 error regarding paying quarterly estimated taxes.

“It’s less a myth than a misconception,” Jensen said. “People need to understand the difference of being a full-time employee and being a contract employee. People can work under a contract, but they’re getting a check on the first and the 15th of the month—so it feels very much like a salary. But it’s not: They’re self-employed.”

Major myths

One of the more serious misconceptions taxpayers may have is that they can just pay their estimated taxes in one lump sum at the end of the year.

This is a mistake typically made by someone new to paying estimated taxes, according to Zinman, a certified public accountant who chairs the tax committee of the National Conference of CPA Practitioners. It's incorrect to think the IRS is OK with an end-of-year payment, he said. If you owe more than $1,000, the IRS wants its owed taxes paid during the year. Any missed quarterly payment will result in penalties and interest.

Additionally, waiting until the end of the year may lead to financial mismanagement by people who fail to reserve enough funds to satisfy their tax debt, which is a problem that can follow a taxpayer into the the next year and beyond.

For a person who must pay taxes quarterly, following the schedule is enormously important, Zinman stressed. Missing quarterly deadlines, even by one day, will mean accruing penalties and interest.

“A misconception is that if you miss a payment by a couple of days then you should just wait until your next payment is due," Zinman said. "This is incorrect.” He advises sending the payment as soon as possible and appealing any penalty.

“The IRS can be pretty forgiving about penalties,” said Zinman. “They are a lot more interested in collecting the taxes than penalties.”

What is a 1099?

Many people misunderstand what a Form 1099-MISC denotes and who receives it.

A person who is considered an employee of a company—whether salaried or paid by the hour—will receive a Form W-2, which shows how much money has been withheld throughout the year for federal, state, Social Security and Medicare taxes. Such a person will be responsible for paying half of the payroll taxes due based on his taxable income. His employer withholds and pays the other half.

For the income reported on a Form 1099-MISC, however, no tax has been withheld by the party that paid the self-employed individual for work performed. The self-employed person is responsible for paying the full amount of payroll taxes on the amount listed on the Form 1099.

“The 1099 form by itself is nothing,” said Jensen. “A 1099 means you’re liable for self-employment tax.”

Some people mistakenly believe that if they receive a Form 1099, it does not necessarily mean the IRS received a copy, Zinman said.

That scenario, however, is highly unlikely, he said. “If you get it, the IRS got it,” he said.

Similarly, people erroneously believe that if they did not receive a Form 1099, they don't have to report the tax. The IRS, Zinman says, does not care whether you received your Form 1099. If you received untaxed income, you must report it. In fact, beginning back in 2012 (for the 2011 tax year) businesses and corporations must respond, via a line-item question on their tax forms, whether they paid miscellaneous income during the year and whether they issued the appropriate 1099-MISC forms.

Payment timeline

The Internal Revenue Service has established four due dates for paying estimated taxes—unless you can pay estimated taxes for the year upfront. Typically, the due date is the 15th for each of the months in which payments must be made. If the 15th falls on a weekend or a federal holiday, however, the due date is moved to the following business day.

The schedule works out like this:

  • For income received Jan. 1 through March 31, estimated tax is due April 15.
  • For income received April 1 through May 31, estimated tax is due June 15.
  • For income received June 1 through Aug. 31, estimated tax is due Sept. 15.
  • And for income received Sept. 1 through Dec. 31, estimated tax is due Jan. 15.

A payment not postmarked on or before the due date will be considered late and you will be penalized.

Perfect for independent contractors
and businesses

Find more tax deductions so you can keep more of the money you earn with TurboTax Self-Employed.

For only $119.99$89.99*
Start for Free

Looking for more information?

The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.


Security is built into everything we do
Here's how
* Important Offer Details and Disclosures
  • TURBOTAX ONLINE/MOBILE

  • Try for Free/Pay When You File: TurboTax online and mobile pricing is based on your tax situation and varies by product. Absolute Zero $0 federal (forms 1040EZ/1040A) + $0 state limited time offer only available with TurboTax Free Edition; offer may change or end at any time without notice. Actual prices are determined at the time of print or e-file and are subject to change without notice. Savings and price comparisons based on anticipated price increase. Special discount offers may not be valid for mobile in-app purchases.
  • QuickBooks Self-Employed Offer with TurboTax Self-Employed: To receive your complimentary subscription to QuickBooks Self-Employed through 4/30/19, you must pay for your 2017 TurboTax Self-Employed return by 4/17/18 and sign-in and access your QuickBooks Self-Employed account via mobile app or at https://selfemployed.intuit.com/turbotax at least twice by 7/15/18. You will have the option of renewing your QuickBooks Self-Employed subscription by 4/30/19 for another year at the then-current subscription rate. You may cancel your subscription at any time from within the QuickBooks Self-Employed billing section. See QuickBooks.com for price comparison. Offer not valid for existing QuickBooks Self-Employed subscribers already on a payment plan.
  • Pays for itself (TurboTax Self-Employed): Estimates based on deductible business expenses calculated at the self-employment tax income rate (15%) for tax year 2017. Actual results will vary based on your tax situation.
  • Anytime, anywhere: Internet access required; standard data rates apply to download and use mobile app.
  • Fastest refund possible: Fastest tax refund with e-file and direct deposit; tax refund time frames will vary.
  • Pay for TurboTax out of your federal refund: A $X.XX Refund Processing Service fee applies to this payment method. Prices are subject to change without notice.
  • TurboTax Help and Support: Access to a TurboTax specialist is included with TurboTax Deluxe, Premier, Self-Employed and TurboTax Live; not included with Free Edition (but is available as an upgrade). TurboTax specialists are available to provide general customer help and support using the TurboTax product. SmartLook on-screen help is available on a PC, laptop or the TurboTax mobile app. Service, area of expertise, experience levels, wait times, hours of operation and availability vary, and are subject to restriction and change without notice.
  • Tax Advice, Expert Review and TurboTax Live: Access to tax advice and Expert Review (the ability to have a Tax Expert review and/or sign your tax return) is included with TurboTax Live or as an upgrade from another version, and available through October 15, 2018. These services are provided only by credentialed CPAs, EAs or tax attorneys. State tax advice is free. Some tax topics or situations may not be included as part of this service, which shall be determined in the tax expert’s sole discretion. In the event your return is reviewed by a tax expert and requires a significant level of tax advice or actual preparation, the tax expert may be required to sign your return as the preparer at which point they will assume primary responsibility for the preparation of your return. Expert Review [and TurboTax Live] not available on the TurboTax mobile app or when using a web browser on your mobile phone. On-screen help is available on a PC, laptop or the TurboTax mobile app. Service, area of expertise, experience levels, wait times, hours of operation and availability vary, and are subject to restriction and change without notice.
  • Tax Return Access and My Docs features: Included with TurboTax Deluxe, Premier, Self-Employed, TurboTax Live or with PLUS benefits. Access to all tax-related documents we have on file for you is available through 10/31/2019. Terms and conditions may vary and are subject to change without notice.
  • #1 best-selling tax software: Based on aggregated sales data for all tax year 2016 TurboTax products.
  • Most Popular: TurboTax Deluxe is our most popular product among TurboTax Online users with more complex tax situations.
  • CompleteCheck: Covered under the TurboTax accurate calculations and maximum refund guarantees.
  • #1 rated online tax prep provider: Based on independent comparison of the best online tax software by TopTenReviews.com March 13, 2017.
  • Get tips based on your tax and credit data to help get you to where you want to be: Tax and credit data accessed upon your consent.
  • TURBOTAX CD/DOWNLOAD SOFTWARE

  • TurboTax CD/Download products: Price includes tax preparation and printing of federal tax returns and free federal e-file of up to 5 federal tax returns. Additional fees apply for e-filing state returns. E-file fees do not apply to New York state returns. Savings and price comparison based on anticipated price increase. Prices subject to change without notice.
  • Fastest refund possible: Fastest tax refund with e-file and direct deposit; tax refund time frames will vary.
  • Pay for TurboTax out of your federal refund: A $X.XX Refund Processing Service fee applies to this payment method. Prices are subject to change without notice. This benefit is available with TurboTax Federal products except TurboTax Business.
  • About our TurboTax Product Experts: Customer service and product support vary by time of year.
  • About our credentialed tax experts: Live tax advice via phone is included with Premier and Home & Business; fees apply for Basic and Deluxe customers. State tax advice is free. Service, experience levels, hours of operation and availability vary, and are subject to restriction and change without notice. Not available for TurboTax Business customers.
  • #1 best-selling tax software: Based on aggregated sales data for all tax year 2016 TurboTax products.
  • Data Import: Imports financial data from participating companies; may require a free Intuit online account. Quicken and QuickBooks import not available with TurboTax installed on a Mac. Imports from Quicken (2016 and higher) and QuickBooks Desktop (2012 and higher); both Windows only. Quicken import not available for TurboTax Business. Quicken products provided by Quicken Inc., Quicken import subject to change.