With sole proprietor, what % should I expect the IRS to take from my earnings?

Question

Should I put aside $150 for every 1,000 or more?

Answer 1

You'll need more than that just for the self-employment taxes which run 15.3% of net income. Add income tax to that, which is on a sliding scale so without knowing your net income it's not possible to say.

And you generally don't just "put it aside" until April 15th. You will need to make quarterly estimated payments to the IRS using Form 1040-ES if your tax liability is expected to exceed $1,000. If your state has an income tax, you'll probably need to make estimated payments to the state as well.

For sake of argument, if your net income was $70k and you are Single and use the standard deduction, your income tax liability will be about $12,000 and another $10,710 for self-employment tax for a total of around $22,700. You'd need to make 4 quarterly payments of $5,675 to avoid penalties and interest for underpayment of tax and not owe anything at tax time. That's about $324 per $1,000 with a net income of $70k

Answer 2

You are taxed on your NET earnings after subtracting the expenses of running your business.

Self-employment tax is 15.3% of the net, so that's around $150. Then you also have to pay income tax - the amount there would depend on how much your total net income is, and also your filing status, personal deductions, exemptions, and credits, so it's not possible to estimate that from the info in your question. And depending on where you live, there might also be state and/or local income tax.

$150 on each $1000 of NET income won't be enough.

Answer 3

If i am u, i will evade tax, but in a smart way.
Buy car, spent at night club.
I rather spend off then to feed to people who
dun deserve it.