Do you pay higher taxes when you are self employed?

Question

I am starting a job tomorrow where I will be considered "self employed". I will be working as a full-time secretary at a Real Estate agency and will be responsible for handling my own taxes. Apparently this is a common situation at jobs here in TN. I have been doing a lot of research on self employment taxes, and it doesn't seem to be as bad as I thought it might be. (I was warned that I would be paying more in taxes than if an employer took out the taxes.) I am curious if anyone has any straightforward and EASY tips on how to I could figure out that taxes I will need to hold back from each pay check so that I don't run into trouble with owning too much when I pay my taxes quarterly. I will be claming married with 2, because my husband is not working, and I am the sole provider in my household.

Answer 1

You are self-employed so you have no employer withholding. You don't fill out a W-4. If your real estate agency is offering to withhold your self-employment taxes, you should decline and do it yourself.

From your description, you'll have few expenses to deduct so I'll ignore them to answer your question. I am assuming you have no children.

If your income is $16,000 and you file married filing jointly with 2 exemptions, your taxable income is zero and you owe no income tax. However, you will pay 15.3% of your income to Social Security, and that would be about $2,400. So you need to set aside $200 per month.

Send in quarterly payments of $600 using the vouchers in this publication:

http://www.irs.gov/pub/irs-pdf/f1040.pdf

Payments are due 4/16, 6/16, 9/17 of 2007 and 1/15 of 2008.

Then when you file your tax return, you record the payments you have sent in, which should just about equal the self-employment tax you owe.

Answer 2

If you were considered an employee, you'd have 7.65% deducted from your paycheck for social security and medicare, and your employer will pay in an equal amount. As "self-employed" you'll pay both halves, or 15.3%. The federal income tax will be about the same either way, although as "self-employed" there might be some extra items you can deduct.

If you set aside about 30% of what you get for quarterly taxes, you should be OK.

Answer 3

Oh, so sorry, you're literally not remembering properly, till you also spend very a lot of money on gas, or possibly deduct a good number of mileage; which potential you're making $10K, yet spent a tone of money to earn it. Assuming this isn't precisely real, you'll owe Feds about $500 in earnings tax, and about $1530 in self-employment tax. i assume you'll owe Ohio contained in the $one hundred - $three hundred decision. you'll be penalized only slightly for not having paid something in envisioned funds.... inspite of the indisputable fact that, there are some belongings you may do to reduce those taxes, in the journey that your mothers and fathers are alive, in the journey that they own their abode, and also you act earlier December a million. With their help, there are some tax planning "tricks" you should use to reduce the Fed and State earnings taxes to 0, and shrink the self-employment taxes to about $750, and your mothers and fathers received't pay an further nickel in taxes. once you've residing grandparents who also own their own residence, you may shrink it no taxes, and no human being will pay any extra tax. i'm assuming that both your mothers and fathers and grandparents might want to furnish you with lower back any money that i might want to practice you techniques to furnish them.... it truly is quick, basic and legal. yet I received't demonstrate it right here in this communicate board. i'm a CPA that not really prepares taxes, yet can practice you legal techniques to reduce your taxes. enable's ascertain out a thanks to connect once you're in touch.

Answer 4

Only in that you pay both the employer and employee side of FICA taxes.

Income taxes should not matter.