What percentage should I with hold from my check.?

Question

Im about to be sort of self employed. Looks like im going to gross about 10k per month with about 2k in business expences. What % should I keep out each month to cover My Tax's, FICA, Medicare, and self employment tax's to be covered?

Answer 1

28% of your gross monthly revenue will cover federal income tax and full self employment taxes (Social Security and Medicare employee and employer total combined), based upon your info and the following assumptions and calculations:

Your net business income would be $8,000 per month. That would make your Annual income $96,000. Assuming that you are filing as single, using the standard deduction (5,150) claiming one exemption for yourself (3,300) , then your Federal taxable income would be $87,550 and your tax (based on 2006 tables) would be approximately:

Federal income tax $18,846 = 15.70% of 120K gross

Social security self employment at 15.3% of Sch C income of $96k = $ 14,688 or 12.24% of 120k gross

15.70% + 12.24% = 27.94% of gross of 120K

These figures include Federal tax and self employment taxes, but not state income taxes. Percentages are calculated on the gross revenue. If you withhold 28% of your monthly gross for federal tax and social secruity and medicare combined. If you are married with a non-working spouse, this % will be high. If you are married with a working spouse, this percentage will be low.

You are just about at the OASDI limit for 2006. Above that limit, 12.4% of the 15.3% self employment tax would drop out. You are at a 28% marginal tax bracket for federal income tax alone ( the rate that would apply to each additional dollar of taxable income over the figures used in this calculation.)

Answer 2

about 108k a year?

Off of the top of my head, I beleive about 28% for the taxes unless it might put you in the 33% or 36% depending on exemptions, pre-tax deductions and hte sorts. (depending on the state you reside in and state taxes taken out as well.


will need to take in consideration that also to double the regular amount for the social security withholdings. The business would pay a matching amount as what would be taken out of your pay.

Check these websites for more detailed and accurate information.


www.sba.gov
http://www.nsba.biz/
http://www.businesstown.com/taxes/taxes-employment.asp
http://www.irs.gov/businesses/small/article/0,,id=98858,00.html