How do you figured how much money to put away for taxes on a 1099.?

How do you figured how much money to put away for taxes on a 1099.?

Postby sheldon » Tue May 10, 2011 12:28 pm

Hello,

I make about $400 a week in Florida. So say, roughly $19,000-20,000 a year. How much should I be looking to put away each week out of my $400 pay check. How do you figure the percentage?

Thanks!
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How do you figured how much money to put away for taxes on a 1099.?

Postby isaakios57 » Tue May 10, 2011 12:32 pm

SE taxes are 13.2%. Federal and state will depend. You fill out a schedule C and subtract expenses first.
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How do you figured how much money to put away for taxes on a 1099.?

Postby berinhard » Tue May 10, 2011 12:34 pm

as self employed you will determine your net amount on a Sch C and the self employment taxes on that net will be approx. 13.3% of the net(this is on Sch SE)--you can find both on www.irs.gov
you need to determine your self employment tax each quarter(April voucher already late), June 15, Sept. 15, and Jan 15, of next year
if you are single, no dependents your non taxable income is $9500 and an excess will incur income tax which you also need to include on the 1040ES you file each quarter
the lowest rate is 10% and rises as the income rises
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How do you figured how much money to put away for taxes on a 1099.?

Postby beamer » Tue May 10, 2011 12:36 pm

A check you get for 1099 work is technically not a "paycheck". The word "paycheck" means a check for W-2 work. This has nothing to do with taxes, but it is important to be aware of it, in case it comes up later.

For federal self-employment tax, estimate $60 per week.
For federal income tax, if your total income for the year, from everything, not just this, is $19,000-$20,000, then estimate $1200-$1300 per year, which is $25 per week. If you also have other income, then the tax on the income that we are discussing will be higher. (The tax rate on all the income depends on the total amount of income.)
Therefore, the total to save per week for taxes is between $80 and $90 per week.
To convert this to a percentage, divide by the amount of income ($400), which gives you 20-22.5%.
This makes since self-employment tax is 15.3% of 92.35% (which comes out to 14%) and income tax is $0 on approximately $9400 and 10-15% on the rest (which averages out to 6-6.5% for income tax), so the total should be 20-22.5%.

You are not allowed to hold onto the money until the end of the year. You must pre-pay the estimated tax four times per year. See Form 1040-ES and the instructions for Form 1040-ES to learn how to pay the estimated tax and how to calculate the amount to pay.
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