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2007-08-15 06:41:34 · 10 answers · asked by Anonymous in Business & Finance Taxes United States

This is for part time work on the side. I have a regular part time job, so my earnings will probably be less than $10,000 a year.

2007-08-15 06:53:55 · update #1

10 answers

So many answers, and all of them incorrect in one aspect or another.

As an independent contractor, your earnings will be subject to regular federal income tax (at whatever your tax rate is), state income tax (at whatever rate your state is, if they have a state income tax), and also, self-employment (SE) tax, which will be taxed on your net earnings from being an independent contractor. You will file a Schedule C for being an independent contractor and report all the income and expenses from the business (I have included a link to various expenses for a self-employed person such as yourself) to come up with a net profit/loss from your business. If your business has a profit of more than $400, you are liable for SE tax, which is 15.3% of 92.35% of the net profit. This is equal to the social security and medicare taxes that would be taken out of your paycheck and matched by your employer if you were an employee getting a paycheck.

As a self employed person you are required to pay quarterly estimates using form 1040-est. The estimates are due 4/15, 6/15, 9/15 and 1/15 of the following year. You will not have an underpayment penalty if you pay your estimates so that you have paid either 90% of the current year tax (awfully hard to do since you won't know that until after the end of the year) or 110% of the prior year tax (110% for high income persons).

Side question for Tigger321. What kind of business form do you have that you pay yourself as an employee? If you have an 1120 or 1120-s then you can put yourself on the payroll and pay yourself as an employee. If it's just a Schedule C business, then you're not supposed to put yourself on payroll.

2007-08-15 06:54:37 · answer #1 · answered by Anonymous · 0 0

Not an easy question to answer, because it depends on your total income, deductions and so forth. You should be aware that as an idependent contractor your income is subject to (about) 15 percent tax for social security as well as the regular income tax, although you do get to deduct some of that on your 1040 (I told you it was a little complicated). But in answer to your question, I would put aside about 25 percent. And, again depending on circumstances, it might be a requirement that you pay estimated tax payments throughout the year. I think you should consult a tax professional who could look at the specfics of your particular circumstance and give you solid professional advice. Whatever you pay him, can be deducted as a business expense. Re: the answer directly below, I don't know where that person came up with 23,000. What is unknown is how much you make from your primary job, this added to what you net from your independent contractor position is your total income.

2016-05-18 21:19:16 · answer #2 · answered by ? 3 · 0 0

What matters is your TOTAL income, since it all gets added together on your 1040. If you are in a 15% bracket normally, set aside about 1/3 for federal - if you are in a 25% bracket already, then 40%. This is in addition to whatever percent your state will charge - that could be from zero to close to 10% depending on where you live.

2007-08-15 08:36:48 · answer #3 · answered by Judy 7 · 0 0

Here is the key: Self employeed people must set aside an amount equal to the tax due or else a minimum of 110% of last years taxes (safe haven). There is no fixed percentage contrary to the well meaning answers above.

2007-08-15 06:50:35 · answer #4 · answered by Flyboy 6 · 0 1

As an independent contractor / small business owner myself I usually pay myself as a regular employee and depending on where you live ( state income taxes vary ) I keep 15% out for taxes.

2007-08-15 06:53:07 · answer #5 · answered by Tigger321 1 · 0 1

If you plan to gross over $60,000 or $70,000 I would withhold 33% for Federal, 14% for Social security and whatever your state tax is, around 5% to 7%. The first $20,000 is taxed at a lower amount so I would take that into consideration.

2007-08-15 06:46:31 · answer #6 · answered by Anonymous · 0 2

If you are a small, independent contractor and you have to pay tax, what you need is a new accountant, not a bank account with money for taxes.

2007-08-15 07:07:01 · answer #7 · answered by P.A.M. 5 · 1 2

in nys state i made 97,000 give or take a little...between the fed (irs) and state i paid 25,000...get in touch with a CPA or tax preparer and they can set you up to make quarterly payments so you don't have such a "BIG" hit at tax time

2007-08-15 06:48:42 · answer #8 · answered by Anonymous · 0 1

I would suggest at least 25%. Get an accountant to review your earnings (or projected earnings if you're just starting) - they can give you a beter idea.

2007-08-15 06:50:44 · answer #9 · answered by reandsmom77 6 · 1 3

I believe it's 10%. Contact the IRS and they will be able to tell you for free.

2007-08-15 06:47:05 · answer #10 · answered by Smarty Pants 4 · 0 4

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