I have been freelancing design work from my home all year. I was working another full time job up until 2 months ago, when I started freelancing full-time. I haven't set anything aside for taxes and I'm worried that it might be a lot. So far this year, I have made a little over $4,000 with my freelance work. How can I estimate what I will owe? I don't have a business license, does that change anything?
2007-10-27 13:07:00 · 4 answers · asked by . 2 in Business & Finance ➔ Taxes ➔ United States
I'm not sure if this matters, but 95% of all payments were made to me through PayPal.
2007-10-27 13:11:34 · update #1
Get some tax help go to your local HR Block and talk with someone their if you don't feel comfortable with the person try a different branch not all tax pros are the same. They should be able to answer your questions and help you through the process.
Curtisports2 explained it pretty well I thought.
2007-10-27 16:06:16 · answer #1 · answered by hpasi923 2 · 0⤊ 0⤋
Depends on what you mean by a lot, but it won't be small. Your federal and state income taxes will be at whatever your rate is including ALL of your income for the year, your job and your freelancing. Then you'll also owe self-employment tax on the freelancing, 15.3%, less some adjustments. So overall, is likely over $1000 that you'll owe.
Not having a business license doesn't make any difference, it's still income.
Curtispo... started off well with his answer, but fell down badly on the self-employment tax. It cuts in at $400, not a couple thousand, and is more than 12%. Actually nets out to around 14%.
2007-10-29 18:45:16 · answer #2 · answered by Judy 7 · 0⤊ 0⤋
A lot depends on how much you earned at your job. You will have to fill out a Schedule C for your business. Be sure to keep good records of expenses to offset business income, and mileage records for your car (if it's used in your business). What you will owe on net profit is your marginal rate, or the highest tax bracket (your total tax will be at a lower rate because your first ten thousand or so there is zero tax, then it goes to 15% and up). If your total income for the year will be under 50K, figure you should have put away 15% of your business income for federal tax, state tax depends on your state (some have no income tax), and if your net profit is more than a couple thousand, you will also have to do a self-employment tax form to see what self-employment tax you will owe. This is the equivalent of Social Security withholding tax from wage earners, except here you pay both the employee (you) and the employer (you) share. That's about 12% of the profit above the first couple thousand or so.
These are only ballpark figures, of course. You'll need professional tax help.
2007-10-27 20:23:45 · answer #3 · answered by curtisports2 7 · 2⤊ 0⤋
Really really rough guestimate: 30% of your profit should do it. PayPay fees are a business deduction.
2007-10-27 21:02:48 · answer #4 · answered by Anonymous · 0⤊ 0⤋