I am a self employed consultant. How much of my income should I be setting aside to cover my Fed taxes? 28%?

Question

I am now a self employed consultant as of last week. I filled out a w9 form for my customer. How much of my income should I be setting aside to cover my Federal taxes? I also live in Massachusetts, and we have a 5% State Tax as well, so that must be added to the amount as well.
Does anyone know the average percent that I should be setting aside? I somehow think that 28% is a good figure? Please help! Thanks.

Answer 1

15% for self-employment taxes. 5% for Massachusetts taxes. For federal income taxes, whatever your tax bracket is (may be anywhere from 10% to 28%). Then add it all.

Answer 2

28% Fed is a safe number. Remember that the 28% rate only kicks in above a certain income level - look at a 2006 tax table and see for yourself, and that you are taxed at 0% and 15% brackets along the way. So if your income should rise to where you pay more than 28% on your final dollars earned for the year, the lower brackets should cover you.

If your income is that high, though, you are going to have to file quarterly returns and pay taxes quarterly.

I forgot to mention the self employment tax, which is around 12.5%.

Good luck with the consulting.

Answer 3

28% isn't likely to be enough, but the amount will depend on how much you make total, which drives your tax bracket. You'll be paying 20% just for state and for self-employment tax (social security and medicare), plus whatever income tax you owe.

Answer 4

You have to cover you income tax, self employment tax, social security contribution, state tax, and if applicable city tax. I know when I am working at a salaried position approximately half of my income goes to taxes. So you might want to start there and decrease as needed.

Answer 5

Use Form 1040 ES to EStimate what you will owe. Self-employment tax (Social Security & Medicare for self employed persons) is 15.3% of 92.35% of net profit.

Answer 6

federal / state income tax
FICA tax
Self employment tax
unemployment tax
workers com tax ??
a total of about 32 to 35 percent

Answer 7

More; a lot more.

Go to the IRS's website, and download the 1040 long form, go through it, you will have to get other forms to, but the 1040 will direct you to them.
http://en.wikipedia.org/wiki/Tax_forms_in_the_United_States

You also have to pay Social Security both the employee's half and the employer's have.

Answer 8

you are thinking employee check (past jobs) and not owner. you are in a new tax bracket now, think lower.

http://en.wikipedia.org/wiki/Self-employment