How much in taxes would I have to pay if I was an independent contractor/self employed?

Answer 1

You would pay taxes based on the amount of income you make - just like you do when you are as an employee, (by set "brackets" of tiered income levels), with a couple of exceptions:

1. You generally pay your Federal taxes quarterly, but you can also pay it all at year end too - check with a tax accountant in your area.
2. If you pay your Federal Taxes quarterly, you generally will be paying them based on estimated earnings, - again, at first it's a good idea to see a tax accountant to get set up/

Check with you State Registrar's office, and your State's Department of Revenue to see what the State Tax requirements are.

That, I think, should answer your immediate question, if you don't mind, I'd like to take a few moments to take things a little further if you don't miod, on the off chance that you haven't considered what type of business you want to form, and how complicated you want to make things as you start out.

So: Keep it Simple? - or - Go for the Big Time?

To start out do you want to start slow and with as few rules and regulations to deal with - and focus on mostly residentail and small commercial projects, - or do you want to go after the bid commercial jobs right of the bat? Do you want to be non-union or deal with unions on commercial work?

For exmaple If you keep your business in your "Name", there is very little you need to do, (paper work-wise) in most statres, with regard to Articles of Iincorporations, Business Charter, etc- Sub-Chapter S Corrp, Bussiness law, EEO Reporting, Targeted Business Goals, . - etc.

For Example, say your name id Bob Holly, and you are going to start a Landscaping business. If you name your business Bob Holly's Landscaping, Inc. - you can avoid a whole lot of required complicated government red tape. Just go get your business cards made up, get your ad in the yellow pages and shopping news, get insured, bonded & licensed, Put a pair of magnetic business signs on your truck doors and go plant sod, trees, and bushes.

However, if you want to name your busines "Midwest Landscaping, Inc" then thats a whole different ballgame - and a whole different animal in terms of paperwork, and rules and regulations. Also when you hire people theres all sorts of issues to deal with now - minimum wage, social security, insurance, overtime, OSHA,, 401K's, - etc.

The point is how you want to approach your start up - which can make all the difference in the world. And we have'nt even gotten into a business plan for financing, whether to lease or buy equipment. New or Used? Depreciation on rolling stock, apportioning plates, flip side off-season contract snow removal work, Fleet auction equipment sales, lines of credit, credit lines maintainence, Wholesale alliances, growing stocks, green houses & hot house icooperatives, City/County Contracts for ,yard waste dumps, erquipment shop requirements, City maintainence contracts, retail outlets, and wholesale sales., - etc, etc, - etc. Good Luck!

I'm pulling for you.

Answer 2

You only have to pay taxes on what you have left over after your deductions. As an independent contractor you can deduct a lot more than someone who has a traditional job. For example:

$20,000 income
-$10,000 deductions
-$5,000 mileage deduction
= $5,000 taxable.

So even though you made a lot, only a small portion is taxable.

Answer 3

Self employment income is taxed at the same rate as W-2 wages income. With SE you may have greater opportunity to reduce your taxable income due to greater availability of deductions.

Answer 4

Depends on your earnings and expenses. You also have self employment tax to think about. See a tax professional...like a CPA or someone like that (steer clear of H&R Block...please)...

Answer 5

depends on which state and city you are in and
what expenses you incur as a contractor.
It can be in the 30-35 % range
but you have greater flexibility in writing off business expenses, so you can bring it down