Working as an independent contractor..how much to set aside for taxes? (work, pay)
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Just wondering: Do you end up having to also pay more for your Social Security as a contract worker?
From reading the comments, especially from the OP, it makes me wonder if the contract allows for the op to set a price. How do these jobs go, do they tell you how much you are going to make? As a contractor I would want to say what my time is worth and have them pay me the amount I want.
Just wondering: Do you end up having to also pay more for your Social Security as a contract worker?
From reading the comments, especially from the OP, it makes me wonder if the contract allows for the op to set a price. How do these jobs go, do they tell you how much you are going to make? As a contractor I would want to say what my time is worth and have them pay me the amount I want.
Yes, that is the FICA tax. Your employer pays half of yours, so as a contractor you would be responsible for the over half as well as the current half you are responsible for.
Remember too that you not only want to set aside the $$ but you'll need to make estimated payments. If you plan on paying the entire thing when your tax return is due, you could be subject to underpayment penalties.
Estimateds are due Jan 15 (for the prior year), April 15, June 15 and September 15.
You need the guidance of a CPA for your business. The amount you pay for that time will be peanuts compared to the mistakes you could make without it.
Also each state is going to have vastly different tax rates, so forum advice will be unreliable.
If it is the same tax bracket, take the amount you used to set aside through deductions and add 10% to it. You will have to pay the other half (~7%) of some of the taxes your employer was paying.
Don't forget (although most people ignore it) that there are some "professional" insurances you should carry.
2) I'm an IC & my tax preparer can set it up so I mail at least $200 every 4 mos to the IRS so I don't owe so much at the end. You can have your tax person set up for you to pay a larger installment if you want.
Hey, the more you can set aside without spending all your $ of course, the better!
I'll be doing my taxes real soon & it will be interesting to see how much I'll still owe since I've been paying $200 every 4 mos for the past 12 mos.
I got a new job that is on a contract basis. I'm wondering what percentage of my earnings I should set aside for income and self employment taxes? My state does not have income tax. I just need to figure out how much to set aside for federal. 30%? 33%?
Thanks!
You may be neglecting some important benefits of being self employed. See an accountant. Depending on what your accountant advises you, you may want to reduce your tax bill by paying into Social Security, paying into an IRA, the proper amount to pay quarterly to the IRS, home office expenses, etc.
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