I make about $40k a year.
I would consult a tax professional. Nobody here can give you advice specific to your individual situation.
Ditto above, but make sure you pay in quaterly or you are going to have to write a very big check at the end of the year, trust me. Hiring a tax person will pay for itself in my experience.
Um, shouldn’t your accountant be able to sort you out?
You do have an accountant? :eek:
Unless the IRS changed, be ready to pay the same amount in next year if your income declined. They don’t care if you didn’t work that quarter. They’ll tell you it all straightens out at the end of the year. It makes having no work even worse.
You can get a rough idea by getting the form 1040-ES online and plugging in the numbers in the worksheet.
I came in to say that. Here’s the link to the form.
Be prepared for it to be more that you’re expecting.
It also depends on whether you incorporated, and whether that’s a sub-chapter S, and so forth. Like everyone has said, get an accountant. Trust me: the IRS will levy fees and interest. Onerous interest. (The fees can be waived if you act really dumb, humble, and contrite. But the interest cannot be waived. It can add up to thousands of dollars over just a year or two.)
So much that you’ll wonder why you bother being self employed. Be sure to save receipts for ever expense you can reasonably attribute to your work. It makes the numbers more palatable at the end of the year.
That includes such things as a home office, etc. Again, your accountant should handle all this for you. You MUST get one.
And don’t forget your payroll taxes, like social security and medicare. It’s not just income tax.
I am self-employed and I wholeheartedly support this statement. Some of the best money I spend goes to the accountant. A competent one is worth their weight in gold.
As stated above, use the 1040-ES to get the precise answer.
But ‘back of the envelope’, $10,500, remitted on the fifteenth of April, June, September of the current year, and January of the subsequent year.:
Self-employment taxes (SE):would be 15.3% of revenues in excess of expenses for Self-employment (aka Social security and medicare). Assuming no expenses you’re talking about $6,000 in SE taxes.
Income taxes (assuming single taxpayer): Using one exemption ($3,650) and standard deduction ($5,700), you’ll have $31,000 of taxable income at 15% results in income tax expense of $4,500.
Total Federal taxes – $10,500.
You definitely need to talk to an accountant or other tax professional such as an EA (Enrolled Agent).
You say you make 40k, but don’t indicate whether that’s net or gross. So, we have no useful information on which to base a decision and it sounds like you might not know what expenses to track, let alone how to determine how much to pay. If you fail to track things like mileage through the year, you may just lose those as valid deductions. (A preparer will usually be happy to use an estimate, but the IRS won’t accept that if things go to audit). So, an estimate of the amount of tax is really the tip of the iceberg of information that you need to be seeking out.
My recommendation is to start with the IRS’s Online Learning center for small businesses. http://www.irs.gov/businesses/small/content/0,,id=146331,00.html In particular see http://www.irs.gov/businesses/small/article/0,,id=200274,00.html for the Small Business Tax Workshop. Watch it online or call the IRS for a free DVD copy.
At $40,000 a year?
How cheap can you hire an accountant for?
From my wife’s brief travails with self-employment, generally it seemed her taxes were about twice what an income tax would normally be for the same income.
So what’s so great about an accountant? Why can’t one just keep receipts and read the IRS instructions very carefully?
-Kris
Why do you need a lawyer? Why not just get a subscription to Lexus Nexus?
It is entirely possible to do it all on your own, but accountants help. If you go through a firm that has experience dealing with small business issues they will save you a lot of time. The accountant can also help with the structure of your business and provide good advice. Accountants also do more then taxes, they can help with cost accounting or help with time value of money calculations etc etc.
Here’s an example: Couple did their taxes for years. They kept receipts and read the IRS information. They always owed about $700 each year, but figured they were doing OK. Still, they finally came to me. I got them $2500 as a refund. They argued with me - after all, they’d read the IRS publications. They told me they’d believe it when they got the check in the mail. The check came, it cleared. They let me refiled the last two years and got them $3000 from each year. Their bill was about $800 for all three years because their taxes were so simple. Of course, there was nothing I could do about the $21,000 they’d overpaid for years that we couldn’t amend.
So, yeah, no reason to get an accountant involved.
What was the mistake that they made?
I know the law can be very hard to navigate, hence the need for lawyers. I’m just not aware of any similar complications when it comes to taxes. But then, I’ve never been self-employed. I just file a 1040A.
IANAA, but even I know that the tax code, once you get past the 1040A/EZ is REALLY complicated. Even more so if you have your own business, because you’re not dealing completely with personal tax code anymore.