i just got a job as an independent contractor, how much (% wise ) should i hold out to cover taxes?

Question

i hear anything for 10-30%

i live in texas

Answer 1

It depends on how much expenses you pay to have the job as well as how much you expect to make. That is why you hear ranges. The average person never gets above the 25% tax bracket and, therefore, that is a safe estimate when information is missing. Set that aside in an investment account. Get professional help to make a calculation each quarter (for IRS its Apr, Jun, Sep and Jan for payments)

Answer 2

Take care with the answer above. Not all taxes are deductable as business expenses. The unemployment tax would be (though most of my clients who are self-employed do not pay it, usually only pay it for employees). Only half of the self-employment tax (SS and Med) is deductable, but not on your Schedule C. It's deducted on the first page of the 1040. Employees do not get to deduct their portion of the employment taxes and neither do self employed people. There is no state income tax in Texas, so that saves you a bunch. Federal Income Tax paid the year before is also not deductable. Fees and Licenses associated with the business are usually taken on the Schedule C as well.

If you have never done a self employed tax return, you need to visit with a tax preparer or a CPA that speciallizes in Tax Prep (not all do). Do it before the end of the year since you are supposed to be paying you employment taxes quarterly. A professional will tell you how to do that as well. Better to have it paid in and get a refund than to owe alot in April. The professionals should have a computerized estimator of potential taxes based on last years taxes and estimated earnings.

The 10 to 30% is a traditional range, but it's not 30% of your earnings, it's 30% of your profit! Keeping good books will help you at the end of the year. Good Luck!

Answer 3

Probably somewhere in between the 10 and 30%. 30% is probably closer. If you are making a lot of money, it could be higher than that.

You'll pay around 15% for self-employment taxes - this is for social security and medicare.

Your federal income tax will depend on how much you make among many other factors, but will most likely be between 8 and 15%.

Since Texas doesn't have a state income tax, you won't owe anything there.

Answer 4

Kristi -

You need to hold out your Federal Income Tax, Social Security, Medicare, and unemployment taxes.

You can find your federal withholding by consulting Circular E, Employer's withholding guide, available from the IRS (www.irs.gov). I'm self employed, too, and I have to withhold federal tax as if I gave an employer a W-4 form. This form identifies your martial status and how many exemptions you are claiming. Circular E will tell you how much federal tax to withhold based on those 2 things.

Social Secuity and Medicare amount to 15.3% for both the employers and employees share of both of those taxes. Social Security is 6.2% (employee only portion) and Medicare is 1.45% (employee only portion).

Unemployment taxes are usually a function of your state. Check out http://www.governor.state.tx.us/divisions/ecodev/sba/step2/view for details on employment taxes for Texas.

The good thing is ALL taxes are deductable as business expenses.

Happy Self Employment!

Answer 5

google it,look into your city hall