Independant Contractor Questions

[shibabigk]

I just started a new part time job and am considered a contractor, not actually employed by the company. My questions are, who much should I keep aside for taxes at the end of the year? I'll be making about $200 a month, not a whole lot but I certainly want to be able to pay my taxes without having to dip into savings.
Also, does this make me eligible for any sort of retirement account besides my 401-K from my other job and my Roth? ANd if so, how do those work?

Thanks!!

[jIM_Ohio]

Go to IRS website for retirement plan options.

Search for small business retirement plans.

I would calculate a tax return for 2010 using turbotax online or similar, look for the tax liability, then make sure you pay 1/12 of that amount each month or 25% of that amount each quarter.

[marvholly]

Be VERY careful about accepting independent contractor status. The IRS has VERY specific rules about this classification. Look them up on their web site. WAAAY too many companies try to do this to avoid paying benefits and soc/medicare taxes (reminder: YOU have to pay both sides of these = 15.4%).

[Seeker]

$200 month is like $2400 per year. That's not a whole lot of money.

Depending on the earnings of your other job, and the tax rates thereby, I might recommend that you not do that contracting job.

Your having to do everything tax-wise and expense-wise and billing/paycheck-wise, makes this contracting job a whole lot more work than necessary.

Do you have a lawyer? If so, I recommend that you consult with him/her as to whether or not they would recommend you do this.

[wincrasher]

Don't get your panties in a knot over this.

Just claim this modest income as self employed income. You don't even need to be incorporated, and you certainly don't need to pay a lawyer to tell you anything.

At the end of the year, you'll get a 1099 form for how much you made. How much in taxes you'll pay depends on you tax bracket from your regular income. Use turbotax or tax cut to do the calculations - but I can't imagine it will cause you to pay anymore - likely it will just dimish your refund a little.

If you get lucky enough to earn much more, there are loads of deductions you can claim if related to your business activity, and you can open a SEP IRA to defer up to 25% of this income.

If you want to educate yourself, just read the publications on the IRS website.

Good luck!