paying your own taxes?

Question

if you are self employed what would be the safest percentage of a check to save back for taxes?

Answer 1

hmmm
if you are self employed you should be paying quarterly estimates. You also have to pay both the entire 15.3% for social security and medicare taxes, in addition to the regular income taxes.
But these taxes are only paid on the net income. The total amount of money you recieve would be the gross, but any buisness expenses would then be deducted to derive the net income.
So to answer your question.....you really need an idea of what your net income is going to be. You should be tracking expenses anyway.
It is important to send your quarterly estimates in by the due dates. The IRS assesses penalties if you dont pay in a percentage (90%) of your prior years income. The estimate coupons are form 1040es and can be downloaded from irs.gov and chioosing forms and publications.

hope this helps some

Answer 2

If you want to be ultra conservative, hold back 15.3% of every receipt of income, along with whatever your federal and state tax rates are. For example, if you're in a 20% federal tax bracket and a 5% state tax bracket, you'd want to hold back nearly 40% of your gross income. That's pretty much overkill, because that's assuming that you'll have absolutely no deductions against your self employment income. But, you asked for "safest" . . .

Answer 3

The minimum that I recommend is 30% of your gross earnings. That is because you have to pay 15.3% for self-employment (Social Security) taxes and at least 15% in Federal taxes. If you live in a state that has a high income tax rate, then add that in as well.

This calculation does not include the possibilty of deductions.

Answer 4

Amanda,

This is tough to answer because it depends on so many things: how much you're earning? what are your self-employment expenses? do you have any other income? what are your deductions? etc.

My recommendation is to take blank 2005 tax forms and fill them out using what you project as your 2006 income and deductions - that will actually give you a very accurate estimate - I know, I know, it seems horrible - but really not that difficult.

Answer 5

What check?