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1099 tax question New Job not sure how to keep track of everything and how to figure out what tax bracket I am |
in. I just started a new job as a contract employee. My questions are 1- How do I know which tax bracket I am in 2- How do I figure out how much of my pay to put aside for next years tax time 3- Do I need to keep track of every penny in order to do this, some of my pay comes in the form of a check, but the majority of it is cash. Thanks for the help. Keep track of all income. Keep track of all expenses. Keep track of all miles you drive that are related to the business (outside of the commute),,,note the date, where you went & reason, and the milage. Roughly 15% of your net profit comes off the top to social security tax (or "self-employment tax"). City and state will depend on where you live. Federal will depend on your income. If you make less than $10K, you may not owe much, if any, income tax. Get the 1040-ES taxes forms and worksheets. It will help you figure out how much you need to send in. (or put aside until tax time...but you'll want to send it in quarterly if you owe more than $400 or so...otherwise, next year, they may bill you for interest for not having paid the taxes as you earned the money) Congradulations on the new job. You can figure out what bracket you are in by doing a little math. Guesstimate how much taxable income you will have during the year (wages, investments, independent contractor payments), subtract your guess as to what your unreimbursed expenses associated with your job will be, subtract the dollar amount for the number of exclusions (i.e., one, two, three, etc.) and subtract the amount for either the standard deduction or your itemized deductions (schedule A). You can then plug that figure into the IRS tax table to see what bracket you are in. It will not be perfect, but it should be close.... With regard to your pay, you should set aside enough so that you have no tax to pay at the end of the year. The above analysis should help in answering that question -- although it will not be exact. Yes you do need to keep track of every penny. Every penny that you receive is probably taxable income and it has to be reported. Kreig Mitchell www.irstaxtrouble.com www.irstaxtrouble.com/blog.htm |
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