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Self employment tax [2007-04-11]
This is just social security. You pay the entire amount of 15.75 but it is on your net income after all your deductions. That is why you have to take advantage of every deduction you can for your business. As am employee you pay 7.5% and your employer pays 7.5%. Since you are the employee and the employer, you pay the entire amount. But get a good tax book and see what deductions you can take and plan for next year to take as much as you can legally.
Yes you have to pay self-employment tax [2007-04-09]
cell phone, gas mileage, and utility bills if you work out of your home. Has he asked for these figures as well? You can also write off what he charges you to do the taxes....
When I was an IC, I was advised to stash sm [2008-08-05]
away 30% of my gross, too. Don't forget you'll be paying self-employment taxes, too. To make this easier for me to do, I had two checking accounts. As soon as I got paid, I'd deposit that 30% into the second account and try not to touch it until I paid my quarterly taxes.
And, yes, you pay quarterly. The IRS will send you the estimated payment forms for each quarter after you file the first time. Suggest you make a copy of your check with the form before you mail them out.
It might be worth your while to make an appointment with a tax expert (HR Block, for instance) and get the scoop from them. They were a big help to me.
As far as deductions, save receipts for every single thing you purchase necessary for you to do your job. Save your phone bills, receipts for reference books, your electric bill, etc. You will be able to depreciate your computer, desk, chair, etc. Have a separate folder handy for these and just drop them in as soon as you spend any money on your business. When you get your taxes done, bring your property tax bill and measurements for your entire home and office.
Block gave me handouts with all this stuff on it. An appointment with an expert will really be of help.
As long as you stash away that money faithfully and keep track of receipts and expenses, you'll find IC is not difficult at all. It's all about being organized and keeping everything in its place.
Good luck to you!
Are you an IC with 1099's [2007-07-30]
If you were an IC, then you need to do schedule C (self employed) where you take your deductions from your business gross income. These deductions are completely separate from your personal deductions. If you have absolutely NO deductions, am not sure if you can then just do the SE form to figure out what your your Self employment tax is which is your social sercurity. If you do the Schedule C - you then figure what your net income is from your business and pay your 15.75% on your net income which then goes on Schedule 1040 to be added onto your personal income tax. But you should have some deductions, phone, internet, mileage to bank, computer, etc to offset your income.
Patti
That's what my tax preparer told me [2007-04-09]
He said I should save 25% out of every paycheck - 15% self-employment tax, 10% income tax (actually 12%, but he said just round it off to 25%). Then file quarterly tax returns, which he is supposed to have prepared and mailed to me but I haven
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