Taxes for contract work

[Fievel121]

Okay, so I am going to be doing some contract work next year and will be paid $35,000 or so. Since I'll be paying all the SS and payroll taxes and have never doent that, how much of the $35,000 do I need to put aside for taxes?

 

[planohorn91]

You will pay 15.3% for self employment taxes (7.65% as each the employer and the employee) on top of whatever federal income tax rate you fall in.

 

[Fievel121]

^^^ Does that include SS & FICA? What other taxes do I need to worry about that I don't normally see on a regular paycheck?

 

[CO Horn]

The 15.3 is social security and medicare. I tell self-employed induviduals to set aside 1/3 of their income for taxes.

 

[Fievel121]

So to bring home $35,000 I should ask for $48,000?

 

[taco]

I would recommend at least 1/3 as well

 

[JohnnyM]

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[Fievel121]

^^^oops. Sorry typo. I meant to bring home $32,000 a year. Which would cover all of my living expenses.

 

[busterbrown16]

Anyone have the irs.gov link for this?

 

[accuratehorn]

The other thing you need to find out is if you are required to deposit the taxes annually, quarterly or monthly. You can go by an IRS office, like the one on IH-35 and Rundberg Lane, and they will answer your questions. Don't go on a tax deadline day, they get very crowded.

 

[apd183]

This appears to be the irs.gov page you are looking for:

http://www.irs.gov/businesses/small/article/0,,id=115045,00.html

 

[pasotex]

thanks for the link

 

[pevodog]

You, also, will have the benefit of more favorable ways to deduct expenses. All mileage, business and commuting, necessary expenses such as supplies, phone, tools, computer and or programs. Health insurance premiums go to page 1 and are not limited to only amounts over 7.5 % of AGI. Keep good records ( keep receipts) and track mileage.

The health insurance premiums will not lower self employment taxes, but the other expenses will most definitely help.

 

[Fievel121]

Pevo--thanks that was going to be my next question.

On the commutting, does that exclude your typical home to work mileage?

 

[pevodog]

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[Fievel121]

What about Alcohol? (you know the really important stuff). At a previous job, I would take clients out to dinner but I would always put alcohol on a different tab since my work didn't reimburse me.

It seems like I should probably just save every receipt and expense I can possibly relate to the job and then have a trusted CPA figure it out in the end?