How much should I set aside for taxes?

Question

I babysit and the parents want to cliam the child care credit next year. This means that I will have to claim the income. This is fine but, I need to know an approx. amount that I should set aside for taxes next year. She will be paying me about $500 a month if that helps. Thanks!!

I do not live with my parents!!

I am a married stay at home mother of two!!

Answer 1

Nothing for federal taxes. Anything income under the standard deductions of $8450 and you wont pay any tax.
$500 a month is only $6,000 a year.

You might have to pay state taxes, it depends on your state ceiling. But state shouldnt be more than 8-10 percent

Answer 2

$500 per month = $6000 per year. The standard deduction for singles is $5150 for 2006. That leaves $850 taxable income. You probably can't claim the $3,300 personal exemption because you are most likely still a dependent of your parents. Tax on $850 would be 10% or $85. I believe you would also have to pay self-employment taxes at 15.3% That comes to $918. You total, by my math is $1003. You should make quarterly estimated tax payments if expect your tax to be $1000 or more. If you can find at least $30 worth of expenses related to babysitting, that would reduce your tax by enough that you don't need to make estimated payments.

Answer 3

It depends on what bracket you're already in due to your husband's income, but if he makes under about $45,000, set aside around 1/3 of what you earn from babysitting. If he makes more than that, you'd be safer setting aside around 40%.

You will have to make quarterly estimated payments to send those taxes in, you don't just wait until the end of the year.

Answer 4

You'll need to make quarterly estimated payments to the IRS using Form 1040ES. If this is your only income and you're single, the only tax bite will be the 15.3% Self Employment tax.

If you have other income or if you're married filing jointly, you'll need to set aside and pay in between 10% and 35% for income taxes depending upon your tax bracket.

If you don't make the required quarterly estimated payments, you may be subject to penalties and interest for underpayment of estimated taxes.

Answer 5

I would set aside 20% to 25%. I would put the money in an interest bearing account. Then at the end of the year I would see how much of what I saved went to pay taxes and reevaluate the amount I'm setting aside.