Can I Increase My Full-Time Withholding to Offset My Freelance Income?
I am a salaried employee who makes majority (greater than 90%) of my income from my full-time job. Recently, a freelance project of mine has started to gain more income. In years past the amount I've made has been negligible, so I've always just paid it in a lump sum at the end of the year. Since there's still a lot of time left in the year, could I simply increase my withholding to offset my tax burden? Or should I start paying quarterly taxes?
Answers:
As a CPA, I came across this website and joined just last week, and I just came across your question.
Good question. I commend you for planning ahead so that you don’t end up owing a large balance or incurring the estimated income tax penalty (Form 2210) come tax-time next year.
Both of your suggestions are acceptable. You are right that there is still a lot of time left in the year, so increasing your federal income tax withholding is an option. Alternatively, you could start making estimated income tax payments via Form 1040-ES for 2021.
Adam Dickreiter
As a CPA, I came across this website and joined just last week, and I just came across your question.
Good question. I commend you for planning ahead so that you don’t end up owing a large balance or incurring the estimated income tax penalty (Form 2210) come tax-time next year.
Both of your suggestions are acceptable. You are right that there is still a lot of time left in the year, so increasing your federal income tax withholding is an option. Alternatively, you could start making estimated income tax payments via Form 1040-ES for 2021.
Adam Dickreiter
