What should I do about my 2008 taxex now?

Question

Okay Im in a bind. I started a temping gig and claimed excempt because I thought I was not going to make the 5k to have to file for 2008 taxes. However, I started an internship at the same time and I've just been advised that I am going to have to fill out a 1099 for the stipends Ive been receiving. And my temp gig hasn't let me go so I've been making more than I anticipated. So at this point, by the time Im done with my internship in August, I would have about 7-8k accumulated as "income". Whats going to happen now? Am I better off filling out another W-4 form for my temp gig or leaving it altogether. Am I going to get any penalties when I file or get slammed with taxes I have to pay back. Will the taxes I would be paying for the stipends balance out with those that I did not pay for the temp gig? HELP!

p.s. the internship is in NY and the temp gig in NJ, if that makes a difference.

Answer 1

Don't worry about penalties.  They should be small, if you start making estimated payments, or if you have enough withheld (by adjusting your W4) going forward.

Also, don't quite the temp gig just because of your fear of taxes.     Make as much money as you can...you'll end up with more money.  Even after taxes.

Answer 2

You'll get slammed in taxes.  For the 1099 you'll pay about 14% for self employment tax (social security and medicare) in addition to whatever income tax you owe for the two jobs.

You don't fill out the 1099 by the way, they do and give you a copy and report the income to the IRS.

You'd be wise to do another W-4 dropping to zero allowances, and either have them take out extra besides that or else file a quarterly estimated return and send in what you'll owe if you have it.  Otherwise, when you file for the year you will most likely owe penalties in addition to whatever tax you owe.

Answer 3

Complete a new W4 now and have them begin withholding taxes - if I were you I would ask the do it at a higher rate to make up for the time it wasn't withheld.