How much should I withold for taxes when doing side work? I have a full-time job,side work will be about $32k

Question

Each project will be approx $4000 (computer programming work). I have a full-time job and I'm going to do this work on the side during the weekends. Is there anyway to give the government their cut after each job? I hate trying to put money away to pay for taxes not knowing if it is too much or too little.

Could I setup an LLC and pay the taxes that way? Is there anyway to treat this seperate from my normal income taxes?

I'm not sure what the best way to handle this is.

Thanks.

Answer 1

It is possible to set up a separate tax entity, but for now, you are self-employed and your income and expenses from this job will be reported on Schedule C.

If you already make over $97,500 on your other job, you will not owe any additional Social Security taxes on this side job. You will owe about 3% Medicare, plus of course income taxes, which I would estimate at about 25% for federal.

So, as others have estimated, set aside about 30% should be good. Send in quarterly estimated taxes.

Don't forget to sent in quarterly payments to your state if your state has income tax.

Answer 2

Probably about 30%, plus whatever you might owe for state or local tax.

Since this isn't your only income, it's possible that you could owe more than 30% - that would cover self-employment tax, plus about 15% for federal income tax. If you are in a bracket higher than 15% (including the side income) put away 15% plus whatever your bracket is. Either make quarterly estimated payments using form 1040ES, or increase your withholding on your job to cover the taxes on the additional income.

And no, you can't treat it separately from your other income.

It's possible to elect to have an LLC treated as a corporation rather than a sole proprietorship, but that would probably end up costing you MORE, not less. Otherwise, taxes would work just like if you DIDN'T set up an LLC. See http://www.irs.gov/pub/irs-pdf/p3402.pdf

Answer 3

I would recommend setting aside 30-35% of your side-job earnings to cover your taxes. I'm not sure what tax bracket you'd be in, which is based on how much total income you make during the year, but this should cover it.

Also, if you wanted to, you could set up a separate LLC to run your side-job income as its own business. If you did this, it gives you more legal protection in the event of any lawsuits. For example, you do NOT setup a LLC and you are sued because of faulty programming (obviously hypothetical), you could lose everything you personally own because the income is run through your personal taxes. However, if you setup an LLC, the maximum about you could lose is limited to the amount you have invested in the LLC.

Answer 4

Call a tax service like HR Block or whoever you find in the phone book and see what they say.
I'd put back about 34% of each job's earnings just to make sure it's covered. If that's too much, then you have a little extra to spend at the end of the year. lol. Kind of a forced savings thing. lol.
I have no idea what an LLC is, though I've often wondered about it.