If no taxes are taken out of your pay, would a CPA or tax book keeper be the best to hire?

Question

Or should I contact the IRS for percentages to put aside?

Answer 1

If you understand how to fill out the Form 1040 correctly, then I would say a CPA is not necessary to hire. If you have some items in your return that you may not understand completely, i.e., child tax credit, capital gains/losses, net operating losses, I would suggest hiring a CPA since a little help up front will prevent aggravation later on in dealing with IRS notices.

Answer 2

You probably fit into the category of an independent contractor if:

You hire, supervise and pay assistants;
determine the sequence of your work;
set your own work hours;
work for as many employers as you wish;
are paid by the job;
make your services available to the public;
have an opportunity for profit or loss;
furnish your own tools;
have a substantial investment in your trade;
may be dismissed only under terms of contract.

Employers don't take FICA taxes (Social Security and Medicare) out of your pay if you are an independent contractor, but you're still liable for FICA as a self-employed person. The percentage for self-employment taxes is 12.4% for SS and 2.9% for Medicare (you also have to pay state taxes as well as any local ones that apply).

It wouldn't be a bad idea to consult an accountant at least the first time you do your taxes this way. You have to file a 1040 and Schedules C and SE. That way they can tell you what you can deduct as business expenses, show you how to compute taxable income, and walk you through the process of filling out the forms.

Answer 3

You could also calculate your estimated annual net income from your work (after deducting related expenses), then enter that number, along with any other income, on line 1 of the worksheet on page 4 of the 2006 Form 1040-ES instructions at http://www.irs.gov/pub/irs-pdf/f1040es.pdf. That worksheet will guide you through how much tax you will need to pay in 2006. Note that this will only tell you federal income tax. FICA tax of 15.3% total plus state income tax are in addition to the amount on this form.

Answer 4

No.