Hello,
I’m self employed. At the end of 2022 I stopped working. However I still had a few invoices paid in January. I will receive a 1099-NEC for this year for about $7000.00. My income this year will be from savings, Interest, Dividends, Capital gains etc. Do I pay my quarterly tax based on the $7000? or do I estimate the total of the income from everything else and pay my quarterly based on that.
Thank you,
Sal
Do not base it on just your self-employment income. To avoid underpayment penalties, your estimated 2023 tax payments should total enough to cover one of the following:
Assuming your total income is going down because you’ve stopped working, you can either expect a large refund if you use the first rule, or you need to be pretty sure what your income is going to be for 2023 to be sure you hit one of the other 2 rules.
AJ
Both. “Everything else” is probably larger. Use that as base but then include you taxable portion of the $7k.
Turbotax or H&R Block Taxcut can give a good estimate. Enter last years data to start. Then substitute your $7000 for this year to get an estimate.
AJ, any idea if that applies to state taxes as well? DH is looking at taking on a consulting project again, which means our taxes this year should be much higher than in 2022, but unpredictably so.
NJ in particular is notoriously difficult to deal with, and unfortunately though we don’t live there or work from there, that is the state where the company DH contracts for is located. We are in VA.
TIA,
IP
You would have to look at your state’s website for taxation. Each state is different. I’ve lived in states that have no underpayment penalties, and ones where they have significant underpayment penalties.
If NJ is aggressive enough to tax income that wasn’t earned while living or working there, just because the company that pays the wages is based there, I’d suggest looking for a contracting company that isn’t based in NJ. 
AJ
He is doing contract work exclusively for the company he retired from. Corporate is in NJ.
I suspected further research would be needed on our part, but also flagged the issue to make sure the OP checks in with his state as well. Appreciate your input.
IP
What if he sets up a business in VA to receive the payments, rather than having him paid as an individual? Would NJ require the business to pay NJ income taxes? Looks like VA has pretty cheap fees for setting up LLCs Virginia SCC - Virginia Limited Liability Companies
AJ
Not sure, although he has to have a VA business license to do this and NJ still takes their cut. VA somehow compensates him for that.
I’m reluctant to suggest he set himself up further as a business, since I would prefer he just simply stop working!
Appreciate the suggestion.
IP
Thank you guys for suggestions and advice.
Sal