Help needed part 2 - estimated & self- empl taxes for an ind contractor

[Chickenman Testa]

This piggy backs on my other thread. I am going to start a 6 month independent contractor job and need some advice re: taxes.

I am responsible for payment of my own taxes during this gig and would like some advice informally. I'm going to follow up with a professional as the situation merits.

Anyway, interested in the board's all-knowing thoughts

 

[valleyforgebob]

If you mean how much and when to pay then just put aside the amount of your pay for your bracket, like 25% or 30%, and pay using estimated forms quarterly (ie. April, June, Sept, and Jan.)

 

[Chickenman Testa]

Thanks - easy enough ###

Nfm

 

[psualt]

If you don't plan on having much in the way of expenses you better count on your tax bracket plus 15% for your self employment. A lot of subcontractors don't have much in the way of expenses so 40% is a good number without knowing all the details.

Hard to say without knowing where you end up at the end of the year but the self employment taxes will hammer you nonetheless since they are 15% of your net. Therefore, if you make $50K you are looking at a $7500 tax bill before factoring in your income taxes.

 

[bdgan]

Yes

I don't know your situation but some things to consider:
You can deduct cost of medical insurance if you're self employedUnfortunately you must pay self employment taxes but half is deductibleConsider opening an SEP IRA if your income is high. You can defer 25% of pay up to $53k.Open an account on eftps.gov to make estimated payments. It's much easier than mailing checks and vouchers,

 

[CampbellLION]

Consider setting up an S corporation and having your earnings be paid to the s corp rather than to your social. You will be able to avoid the self-employment taxes. If this is only a one year thing you wont have any problems with the IRs. If this drags on for a few years they have the right to come after you for not paying into social security and medicare, but that is extremely unlikely.

If you just file as an independent contractor on schedule c of your 1040, you will be paying 15% self employment tax on every dollar you make after expenses on top of your regular income tax...it ends up being way more than most ppl expect.