I am an independent contractor. How much money should I put aside for taxes ( will make approx. 12k)?

Question

Thanks, Guys..based on the answers so far I have left our some important info. I am single, head of household, one dependent. I live in the lovely state of Virginia and this income is my revenue. Thanks in advance for any further answers!!! This is really a help.

Answer 1

don't know what state you are in, so can't tell you state tax. What I can tell you is that you will have to pay 15.3% of 92.35% of the $12k for self-employment tax, which would be $1,696. Also, you will have to pay regular income tax on that, which if you take standard deduction of $5,350 and personal exemption of $3,400 would leave you with taxable income of $3,250, which would be a tax of $325. But you should also have earned income credit possibly come into play. I would set aside approximately $2,000 for federal tax.

Answer 2

It depends on whether you have any deductible business expenses for earning that money. And also depends on your marital and filing status, whether you have any dependents, and several other things that you don't mention.

If you are single, no dependents, then around $2000 for federal income tax and self-employment tax - this goes to the IRS, and most of it is self-employment tax (social security and medicare).

Depending on where you live, there might also be state and local taxes.

Answer 3

Well, it depends on....is that $12,000 your revenue or profit? You only pay tax on the profit portion because you will (or should) have saved receipts for costs to write off against your revenue.

But, general rule of thumb, set aside 1/3rd of your expected profit to pay for your taxes (income, self-employment, etc.)