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Comment by nrmitchi | Hacker News Reader

> But with contractors, the IRS only gets that money once a year,

IIRC this isn't true. Non-W2 earners are supposed to do quarterly taxes.

> and often times they're missing a piece of it.

This is kind of a bigger problem, no? If it gets to the end of the year, and so many 1099 contractors don't have enough to pay their taxes that it is actually an issue for the IRS, it strongly implies that those contractors didn't understand how much money they were actually making after tax (and thus, didn't put enough aside). Contractors not understanding how much money they are actually making (in relation to the W2 option) is not a good thing.

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> IIRC this isn't true. Non-W2 earners are supposed to do quarterly taxes.

Maybe in theory, but I would bet, certainly not in practice for the vast majority of contractors earning an average income. You have to be the most honest, organized goody-two-shoes to actually pay those quarterly taxes.

It's also worth noting that many contractors live paycheck-to-paycheck, and even though they know they should be withholding 30% for tax, in practice they have bills to pay first. So when tax time comes (whether quarterly or yearly), they might simply not have the money.

> It's also worth noting that many contractors live paycheck-to-paycheck, and even though they know they should be withholding 30% for tax, in practice they have bills to pay first.

I find it kind of dishonest to call this "living paycheck-to-paycheck" while ignoring tax with-holding. That is not "paycheck-to-paycheck" as much as "not being paid enough to live".

Totally agree, it’s not an ideal situation for the contractor or the government. The question is more whether the government (or your employer as a proxy) should play a protectionist role and handle the withholding for you, or if that should be your responsibility as a contractor.

Speaking from personal experience, it’s much easier said than done. When your rent is due this month, taxes are due next year, and you’ve only got enough for rent... you aren’t gonna withhold 30%. It’s not because you don’t want to, but because you just don’t have the money. Call it poor financial management or whatever you want, but the reality is that lots of people get into this situation. Yet I doubt many of them would blame their clients (or Uber) for the problems. Most would say the government demands too much tax, or they can’t find enough work.

Personally I would be in favor of a $30k annual basic income and eliminating all taxes on up to $100k in earnings. It will never happen, but it would be one of the best things to happen to society in a long time.

Uber drivers are not paid very well, so it wouldn’t surprise me if the money Uber is willing to pay you to drive for them isn’t enough to survive. However it would be a mistake to assume everyone who lives paycheck to paycheck is doing so because they’re being paid a sub-living wage. I’m in college and I know students who got into thousand of dollars of credit card debt so they could buy weed and designer clothes. If you give people money and say “by the way, we’re going to need some of this back eventually” (which is the tax situation with independent contractors), many people are just not capable of not spending all of it. (again, not saying this is the case for uber drivers. Although in the case of the uber drivers, keep in mind that there are two factors that determine their wage, what uber is willing to pay and the rate of taxation. Every uber driver could get something like a 30% raise if the government didn’t find it necessary to tax on third of the income of people who, in your words, don’t even make enough money to survive. I find it strange that blame only ever seems to go to uber in this situation)

There are (potentially non-trivial) tax penalties for not paying quarterly taxes, it's not just something that people do for fun.

This is such a wonderfully naive view. Nobody is doing it for fun. They're doing it because they don't have the money nor the time to pay the IRS and an accountant every 3 months.

Nope, you have reached the limit of your knowledge. Estimated taxes must be paid at a minimum every quarter with few exceptions. You'd face large penalties for not complying over a period of time.

https://directpay.irs.gov/directpay/payment

That doesn't mean filing, it means estimating and paying.

The rest of your post was pretty good, so it's disappointing to see you double-down on its one major flaw.

I'm not disputing that it's a requirement. I'm guessing that its compliance rate is low.

Compliance rate probably increases when the first penalty arrives for taxes being 9 months late. They are usually lax at first however.

There are penalties if you don't pay your quarterly estimates.

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