Celebrating 10 years! 2007-2017

Withholding your own taxes

Morning. I recently landed some contract work (presumably fo banana03/17/17
Easiest depends on how much you're earning, and when. The joecoder03/17/17
You're supposed to pay quarterly. The online tax filing serv fettywap03/17/17
Appreciate it. Thanks banana03/17/17
Keep in mind that in certain states/cities you are required imoothereforeim03/17/17
At a bare minimum, you need to set aside and pay 15.3% feder caj11103/19/17
So helpful. Thanks a lot! banana03/20/17
banana (Mar 17, 2017 - 11:25 am)

Morning. I recently landed some contract work (presumably for the next few months). I am being paid as a 1099 independent contractor. Taxes from my paychecks will not be withheld, so I am responsible for withholding them myself/putting away the amount to pay. I'm going to guess I'm not the only person who's had to do this before and that this is normal among solo practitioners/independent contract attorneys. If you've done this, what ways have you found most helpful in recording earnings and withholding money to pay taxes? State/federal? Did you just put away a percentage? I'm aware it'll be different for every state and that I can consult professionals who work in this area, but some suggestions would be helpful for getting organized upfront.

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joecoder (Mar 17, 2017 - 11:53 am)

Easiest depends on how much you're earning, and when.

There are no penalties as long as you pay 100% of your prior year taxes as estimates.

So, if the income will be similar you could divide your prior year taxes by 4, make quarterly payments in those amounts and be done with it.

Then just settle up on tax day.

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fettywap (Mar 17, 2017 - 11:31 am)

You're supposed to pay quarterly. The online tax filing services should be able to do this for you cheaply.

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banana (Mar 17, 2017 - 11:44 am)

Appreciate it. Thanks

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imoothereforeim (Mar 17, 2017 - 12:54 pm)

Keep in mind that in certain states/cities you are required to deal with the local government for receiving 1099 (e.g., licensing clearance, registration, and taxes - LA wants its 1% city income tax, for example).

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caj111 (Mar 19, 2017 - 12:43 am)

At a bare minimum, you need to set aside and pay 15.3% federal self-employment tax to cover Medicare and Social Security. For example, if you make $ 1000 a week, set aside $ 153 for the Self-Employment tax. Then you need to pay regular estimated federal income tax and estimated state income tax. You need to figure out what tax bracket you think you will be in and set aside that much as well. If you think you'll be in the 15% federal tax bracket, set aside another $150 from each check in my hypothetical example.

You don't necessarily need to wait until the end of the quarter, you have the option to make estimated payments as often as you like, whatever works for you.

For federal estimated payments, go to www.irs.gov/payments and click on "IRS Direct Pay" to pay right out of your bank account (paying by credit card incurs a service charge and I think is a bad deal). Then select "Make a Payment", then on the drop-down menus "Estimated Tax". The rest is pretty intuitive.

I don't what state you're in, but just about all states with an income tax allow for online payments as well. Some are as easy to do with no online account setup (just like the IRS), whereas others are a bit of a hassle and make you set up an online account (unlike the IRS). Some don't let you make online payments if you've never filed a return in the state before, and so you have to mail the payments in, but payment vouchers should be available on the state's website.

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banana (Mar 20, 2017 - 6:30 pm)

So helpful. Thanks a lot!

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