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Old 07-25-2011, 11:49 AM
 
Location: Fountain Inn, SC
179 posts, read 401,070 times
Reputation: 76

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Hello everyone!

In addition to my 9-5 job at the cube farm, I'm now writing for a blog and earning around $1000/mo in extra income starting this month.

I'm currently claiming 8 exemptions from my salaried full-time job. (1 for me, 1 for non-working spouse, 2 for dependent children, 4 for child-tax credit for 2 kids)

There will be no tax withheld from my writing gig and I will receive a 1099M form at the end of the year. This should be around $6000 total extra income for 2011.

I will of course claim a home office and other expenses and depreciated assets (computer, furniture) as well as the costs of a convention I will be attending in September. This should all total around $2,000, leaving around $4,000 in taxable income.

How do I need to go about paying quarterly self-employment tax and estimating what to hold in reserve? Any other advice? Thanks!
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Old 07-25-2011, 12:05 PM
 
Location: Baltimore, MD
3,864 posts, read 7,064,327 times
Reputation: 5112
Kudos on your side income!! I am actally starting my own freelance writing business part-time and I'd kill to make the kind of money.

Now, I'm no expert and a financial person would know best but from what I was reading, its safe to put away 15 - 20% of your income for future taxes. I've read its easier to put it away soon as you get it then to spend it and then try and come up with it at the end of the year.

As fas as filing taxed, I think you can need save all your income statements and take them to a tax preparer who can tell you how much to pay.

Good luck! Hope some rubs off on me.
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Old 07-25-2011, 08:40 PM
 
Location: SoCal desert
8,095 posts, read 12,738,022 times
Reputation: 14832
Quote:
Originally Posted by Amator View Post
How do I need to go about paying quarterly self-employment tax and estimating what to hold in reserve? Any other advice? Thanks!
From the IRS:

"Form 1040-ES, Estimated Tax for Individuals (PDF), is used to figure these taxes. Form 1040-ES contains a worksheet that is similar to Form 1040. You will need your prior year’s annual tax return in order to fill out Form 1040-ES.

... Form 1040-ES also contains blank vouchers you can use when you mail your estimated tax payments"
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Old 07-25-2011, 10:22 PM
 
Location: Long Island
9,035 posts, read 18,351,792 times
Reputation: 4740
Quote:
Originally Posted by Amator View Post
Hello everyone!

In addition to my 9-5 job at the cube farm, I'm now writing for a blog and earning around $1000/mo in extra income starting this month.

I'm currently claiming 8 exemptions from my salaried full-time job. (1 for me, 1 for non-working spouse, 2 for dependent children, 4 for child-tax credit for 2 kids)

There will be no tax withheld from my writing gig and I will receive a 1099M form at the end of the year. This should be around $6000 total extra income for 2011.

I will of course claim a home office and other expenses and depreciated assets (computer, furniture) as well as the costs of a convention I will be attending in September. This should all total around $2,000, leaving around $4,000 in taxable income.

How do I need to go about paying quarterly self-employment tax and estimating what to hold in reserve? Any other advice? Thanks!
There is a way around paying estimated taxes "separately". Since you estimate your side job to bring in about $4K net before taxes, and you expect the income paid on a regular basis, you could just decrease the number of exemptions for your W-2 employment and pay the additional income tax this way. Just fill out a new W-4 form (go to irs.gov and print one out) and hand it in to your employer/HR department and they'll adjust your withholdings accordingly.

Avoids forgetting the deadlines for paying estimated taxes (4/15, 6/15, 9/15 and 1/15).

As an aside, I would estimate at least 25% for taxes, depending on your income and your state tax rates.
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Old 07-26-2011, 08:51 PM
 
5,160 posts, read 6,609,262 times
Reputation: 3520
Don't forget you are entitled to deductions for your self employment income. Open a SEP IRA to even further reduce your net income. Due to the fact you'll be paying over 15% just in FICA taxes being self employed, its imperative you reduce your net income as much as possible.

Simplified Employee Pension Plan (SEP)
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Old 07-26-2011, 11:16 PM
 
Location: Fountain Inn, SC
179 posts, read 401,070 times
Reputation: 76
Thanks for the advice everyone!
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Old 07-27-2011, 12:28 PM
 
4,541 posts, read 9,493,975 times
Reputation: 3848
Quote:
Originally Posted by Elke Mariotti View Post
There is a way around paying estimated taxes "separately". Since you estimate your side job to bring in about $4K net before taxes, and you expect the income paid on a regular basis, you could just decrease the number of exemptions for your W-2 employment and pay the additional income tax this way. Just fill out a new W-4 form (go to irs.gov and print one out) and hand it in to your employer/HR department and they'll adjust your withholdings accordingly.

Avoids forgetting the deadlines for paying estimated taxes (4/15, 6/15, 9/15 and 1/15).
OP - this is what we do. There are some great tax calculators online - that's what I used to figure how much to have taken out.
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Old 07-28-2011, 03:45 PM
 
706 posts, read 2,848,117 times
Reputation: 1013
plan on about 30% of your 1099 income going towards taxes. self employment, FICA, and state.

We increase our W2 withholdings to cover the bulk of it, and make estimated quarterly payments. You'll pay no penalty in subsequent years if you underwithhold - as long as you've paid 90% of what's owed, or 100% of your previous year tax liability.

If I recall, you don't really need to start making estimated tax payments until the second year of your business, as you practically need a full tax return to see what you'll owe .... and keep in mind that a home office deduction is a big audit trigger. If you use the home office for even one thing non-business related, (print a page, or use the 'business' fax) there goes your deduction, in the IRS' eyes.
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