How to estimate quarterly tax payments
Many optometrists working in private practice, opticals, or even commercial modalities are treated as independent contractors as opposed to employees. Often times, there is not much of a difference between the two in regards to how you are treated or what your work entails. The distinction presents itself in how you are paid.
Independent contractors are treated as “self employed” and as such, are paid on a 1099 tax form rather than a W2 tax form. This is the form that an employer sends the employee at the end of the year to show the employees total earnings and will be critical for doing estimate quarterly tax payments.
Here is a video, The Basics of Tax W2 vs W9 in Optometry, and estimate quarterly tax payments– Interview with CPA Gary Topple
The difference between at 1099 and a W2 tax form
- As a 1099 tax filer, you are responsible for paying all necessary taxes to the government and calculating the withholding tax deductions from your paycheck.
- As a W2 tax filer, taxes are withheld by your employer, typically per paycheck.
- One of the biggest differences between a 1099 and a W2 pay modality is that, as a self-employed individual (1099), you are responsible for the full tax rate for FICA which is roughly an additional 7.5% cost to you, a sum that your employer saves. As a W2 employee your employer would have to pay this 7.5%.
- One benefit as a 1099 tax filer is that you are eligible to deduct “business” expenses from your wages. This can effectively save you money on your taxes.
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