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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%?
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%?
If you have to ask that question, you're obviously not charging enough.
?? That's not very helpful. I've never been an independent contractor before so I really don't know. I don't see what that has to do with how much they are paying me
It depends on your tax bracket and a host of other things, like filing status, whether or not you going to itemize your deductions, how much you put into retirement, if any.
For MFJ in 25% tax bracket with one W2 and one 1099 (Self-employed) income, my spouse was setting aside 45% COMBINED for taxes and max allowed SEP IRA contribution.
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.
Thanks so much Wartrace but I don't see any option on there for self employed
You have to open the "advanced" options. Second line down it says "self employed income". Enter your income there as well as in the "other income" in the details section.
If you are a 1099 worker you are considered "self employed". Be sure to note the amount you will owe for self employment tax.
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