Question

My first year self-employed, but employer didn't pay my invoices until the end of the year

Forum|Forum|3 years ago
January 21, 2023
2 replies
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This is my first year as an independent contractor. I knew I had to pay self-employment taxes but decided I would wait until I got my first pay check before I worried about paying taxes. Unfortunately, even though I started working in April of 2022 and put some hours in each month after that, I didn't receive my first pay check until January of this year (dated Dec 23, 2022). Should I have been paying the taxes each quarter even though I had not received the income yet? I assume now I need to make tax payments for all of April thru December, but will I owe penalties also?

Not A Product Question

X

xmasbaby0

If you were self-employed---you did not have an employer. You had a client for whom you worked as an independent contractor. Did they issue a 1099NEC to you--or will they do that by end of January?

You say you worked for a few hours a month. Doing what? Were you doing some sort of ongoing project that you would not be paid for until the project was complete? Why the delay in being paid?

And what do you mean by "first pay check" in December? Have you been paid in full for the work done in 2022 or do they still owe you more?

We need more details.

**Disclaimer: Every effort has been made to offer the most correct information possible. The poster disclaims any legal responsibility for the accuracy of the information that is contained in this post.**

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ThisIsSoTaxingAuthor

Hi xmasbaby0,

I have not received a 1099NEC but I assume I will.

I worked as a manager for the company for six years before retiring. I am now writing user manuals for the company's product since I know the product so well. I submitted invoices monthly. My work from April through September totaled about 75 hours. I did not worry when it was taking so long because it was just extra income that I knew I would eventually get. But it did get to the point of being ridiculous and I eventually hunted down the person that pays the bills and discovered the disconnect. At that point, in early December, I decided not to submit more invoices until they paid the ones I already submitted so as not to confuse matters and introduce more delay. When I received the check last week I submitted my remaining 65 hours for October and November. I expect it will take a couple of weeks to be paid for those hours.

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xmasbaby0

@ThisIsSoTaxing Good grief. We may need some input from a couple of other volunteers here.

@Mike9241 @Critter-3

**Disclaimer: Every effort has been made to offer the most correct information possible. The poster disclaims any legal responsibility for the accuracy of the information that is contained in this post.**

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ThisIsSoTaxingAuthor

I received an e-mail from TurboTax asking me to mark one of the replies as the accepted solution. I can't say that any of the replies fully answered my questions but all of them together pointed me in the direction of choosing what I am ultimately doing.

Since I started this post I have verified with my employer that the check that they cut on 12/23/22 will be on my 2022 1099 as you might expect. I learned through this post the difference between the cash and accrual method. Armed with this knowledge I decided it is in my best interest to go with the cash method, otherwise I would be way behind on my quarterly payments since my first invoice was back in April of last year. Even though I didn't actually get the check until some time after Jan. 5th, I have decided it is easier to allow the income to be reported for 2022 since I can't prove when the check was received and also since the penalty for late payment on my Social Security and Medicare is so small (0.5% per month late which is less than $5). I also discovered while looking at the instructions for the 1040-ES that I don't have to make the estimated payment that was due on Jan 17th if I file my 2022 taxes by Jan 31st. So I can avoid any penalties that I might have incurred otherwise for not making my estimated income tax payment before Jan 17th. I don't know if I'll have all the tax documents by the 31st but I suppose I can make my best guess and then submit a revised return later.

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ThomasM125

The income should be reported in the year it was available to you. That would seem to be 2022 in this case, as you could have called the company and asked about it before year-end and I assume you could have picked it up or had it delivered to you by end of year. It merely has to be available to you, not necessarily delivered to you.

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ThisIsSoTaxingAuthor

In December I asked my point of contact multiple times before Christmas to send my check and then again after Christmas with no response. I assumed that she must already be on an extended Christmas break and that I would have to start harassing her again in the new year. The main office is in Kansas and I am in California so the only way for it to be available to me is it's delivered to me because I am not setup for direct deposit.