what percentage of income should I save for taxes?

Question

starting a buisness and need to know what percentage I should expect to pay for taxes both state (colorado) and federal as to make sure my prices are set right...

Answer 1

100%

Answer 2

30% is a decent "rule of thumb" to use, but you should probably break it down using the actual numbers and what you expect to make.

Colorado state income tax is 4.63% of the amount over
$1850 if single, or
$7000 if married

Federal income tax depends on how much you make. It uses a progressive tax system like this:
* 10%: from $0 to $7,550
* 15%: from $7,551 to $30,650
* 25%: from $30,651 to $74,200
* 28%: from $74,201 to $154,800
* 33%: from $154,801 to $336,550
* 35%: $336,551 and above
You are taxed that % amount on that amount of money. So you would be taxed 10% on the first $7550, then 15% on only the amount between $7551 and $30650, then 25% on only the amount between $30651 and $74200, etc...

This is for a single, unmarried person. You'll have to look into it more to get the exact amounts that you should use (especially if married), but these should give you a good start.

Answer 3

bostonianinmo's first sentence could be misleading. Self-employment tax is due on NET income, not GROSS.

hvandyk82 is WRONG about your CPA being liable. YOU are always liable for the accuracy of your tax return. It makes no difference who prepares it. That said, you MAY be able to recover the amount of any penalties from the CPA.

I've heard 25% of profit as a rule of thumb. If you have a good idea how much you will make, you can use the tax rate tables from the IRS and the CO department of Revenue to estimate your tax liability.

Answer 4

You'll pay 15.3% self employment tax on every net dollar earned. You'll also have to pay state and federal income taxes. Depending upon how much money your business makes, that could be anwhere from nothing to 30% or more of net revenues.

Since you won't be a wage earner you'll need to make quarterly estimated payments to both the federal and state governments. To determine how much these estimated payments should be, you really should retain the services of a good CPA or tax attorney. They can help you figure out the necessary estimated payments based on your business plan and adjust them throughout the year as needed as your business develops and grows.

Answer 5

Retire Rich

http://ca.pfinance.yahoo.com/ca_finance_planning/17/how-to-retire-rich

Retire Rich

Answer 6

To be on the safe side I would hold back 30% of total revenue. And to be even on the SAFER side I would hire a CPA to take care of all the legalites for you. That way if there are any mistakes or miscalculations your CPA would be liable not you.

Answer 7

around 15% is a safe amount