Is saving and self employment really worth it?

Question

I just finished doing my federal income taxes and although I don't want to disclose the amounts, it seems I owe about 50% in taxes on my extra income! I have a full-time job, taxes are fine on that. I'm talking about my bank account interest and my self employment income. After working extra on the weekends and madly saving for an entire year, it just stinks!

Answer 1

Once you get into a high tax bracket, Your savings account at a bank takes a hit. After taxes, your interest does not keep up with inflation. Consider putting your money in a municipal bond money market at Vanguard or Fidelity. The interest rate is lower, but the interest is Federal tax free. If you pick a municipal bond money market in your state, it will be state and Federal tax free.

https://flagship.vanguard.com/VGApp/hnw/FundsSnapshot?FundId=0045&FundIntExt=INT
https://flagship.vanguard.com/VGApp/hnw/FundsSnapshot?FundId=0062&FundIntExt=INT

You should also max out any 401K plans and IRA's. You can also lower your taxes by investing in mutual funds. Taxes on long term capital gains and dividends are only 15%.

https://flagship.vanguard.com/VGApp/hnw/planningeducation/general/PEdGPTaxSavHwToBeTaxSavvyContent.jsp

Answer 2

There are several things to consider.

Self employment are you take all your ducthions? make a big difference. Are you looking at profit and what you pay your self as a total labor cost, IE add the tax of about 35% just as you would with hiring an employee you must take in to considering total labor cost IE taxes workers comp. little do people know for about every ten busk they get it cost about 15 bucks.

Are you working for your self to quite your job? if so you may want to consider no ducthions and maybe some more.

My wife took 0 ducthions and added 5% more maxed out her 401k, the next year she reduces her income even more and put the whole check in to savings, they knew she was going out the door so they gave her a 100% raise, it is a great feeling to go to work and know they do not control you and you can walk at any time.

Last but not least since you are working for your self are you trading your time like a job? or are you investing your time where you make more and more per day hour, week .

Keep up the good work and yes it is worth it, you would not believe how great it is to walk around with more money in your pocket than most people make in a week, or to see any car and know you can just wright a check the list goes on and on.

Answer 3

It is for US.... We are dong wonderful now that we found a tax accountant that has his head out of his a$S !!

Always have people smarter than you working FOR you !! Our accountant (which we only have for tax time) knows all the legal ways of writing off things when self employed. He has saved us tens of thousands of dollars in just a few years.

I know it can be frustrating... the 50% sound horrible.. I couldn't imagine paying that and our tax man makes it possible so we don't. I know you probably don't want to hear it but FIND one. Someone who goes each year to learn all the new tax codes and makes them work for his clients !

We pay $600 to have our taxes done and I would pay even more since he saves us thousands !!!

Answer 4

That still leaves you with 50% of your "Extra money".You have to decide on how much do you value your free time. If your not satisfied with what you made working for yourself, Find another job that will pay you what you want.

Answer 5

Are you an incorporated business? Are you taking advantage of business-related tax write-offs? If not, it explains why your'e paying so much in taxes. Businesses pay less in taxes, not more, if properly set up.