Self-employed folks: how much do you put aside for taxes?

[amastewa93]

My husband and I are both working on a 1099 (self-employed) and this is the first year we will be filing jointly (we are newly married). Our earnings are also projected to be quite a bit more than last year. So, trying to get ahead for next tax season... how much should we be socking away for taxes? I've been reading between 25 and 31% - is that correct?

A side note - We do 100% plan on hiring a tax professional next year and not doing it ourselves - we will be looking for someone to hire over the summer.

[disneysteve]

I am not a tax pro but take a look at this site to start learning the ropes: https://www.irs.gov/businesses/small...als-tax-center

You do need to file quarterly estimates, I believe.

[Fishindude77]

Get a CPA involved now.
A CPA will work with you to estimate your anticipated income and have you do quarterly tax payments, then settle up any adjustments at year end. You might also be able to make a single large payment at start of year and do the adjustments at year end, I've done both.

[amastewa93]

Get a CPA involved now.
A CPA will work with you to estimate your anticipated income and have you do quarterly tax payments, then settle up any adjustments at year end. You might also be able to make a single large payment at start of year and do the adjustments at year end, I've done both.

Thanks for that info! We will start looking for a CPA sooner rather than later then.

[amastewa93]

I am not a tax pro but take a look at this site to start learning the ropes: https://www.irs.gov/businesses/small...als-tax-center

You do need to file quarterly estimates, I believe.

Thanks for the link! I'll check that out. We will definitely need to start filing quarterly.

[disneysteve]

Get a CPA involved now.

I was going to say that, too. Waiting until summer to hire someone is too late. Of course, this is a tough time of year to be CPA shopping as they're all swamped doing taxes but you do need to get someone onboard sooner rather than later.

[Like2Plan]

One little nuance is that estimated taxes are not the same as withholding when it comes to "safe haven" rules. This is a problem for "lumpy income" where you might earn higher amounts in one quarter or another. You can't just make up for it at the end of the year (or even break it down into equal payments). I agree with the others--a CPA should be able to keep you out of trouble. You probably want to find someone sooner than later--

Quarterly estimated tax payments are due four times each year. The payment due dates are as follows:

• April 15 – for January, February and March.
• June 15 – for April and May.
• September 15 – for June, July and August.
• January 15 of the following year – for September, October, November and December.

https://www.irs.gov/faqs/estimated-t.../individuals-2

[~bs]

it's not hard. Look at the self employment tax rate. Estimate how much bottom line income you'll make in a year. If your business is stable, use last year's number and bump it up by XX%. use the federal and state tax tables to estimate how much you will owe in a year. Add it all up, divide by 4, then make estimated payments.

But yeah CPA is your best bet. If you're using a CPA, note that you'll need to have your books and/or check register in order throughout the year. If you provide them with garbage numbers, you'll get garbage estimates.

[amastewa93]

We've gone ahead and found a good CPA that specializes in working with self-employed individuals. As it turns out, my husband did some work on his Porsche and he is going to discount his services for us. Score!

Thanks for all of the info - it was definitely helpful.

~bs We've begun doing estimates and will be meeting with the CPA later this month. However, last year we didn't make anywhere near what we are making now, so we can't quite use last year's as a good gauge. We can for my income, but not my husband's.

[~bs]

^

make sure you claim all legitimate business related expenses. I dont know what your tax rate is, but assuming between self employment and fed/state taxes, you'll reduce taxes paid by 30-50% of the cost of your expense.