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IC taxes and HELP - INMT

Posted: May 19, 2010

Hi, Just accepted an IC position from a private individual. I now have to deal with estimated taxes,, been a long time so I have questions. Pretty basic, been reading,, I will not recieve a check prior to May 31, so I will be doing ET for the first time September 15, 2010. How do I calculate how much to send? I have heard that IC should have a separate checking account and make the deposit in there of the IC check and "pay" myself from there? Any thoughts, advice, suggestions, do's, dont's. Thanks

IC taxes - Also an IC

[ In Reply To ..]
Lots of different ways you can do the IC thing. I pay estimated taxes with every payment I get from my MTSO. It's easier for me that way, but some people do the two account thing. I just don't want to have to deal with that. I'm really bad at trying to save the money because I tend to see it in there and then think I can spend it or an emergency will come up and I'll use that money. Whatever you do, don't get behind in paying your payments and think you'll do a balloon payment at the end of the year. That will bite you in the behind really badly. Been there and done that and it wasn't pretty.

As far as figuring out how much to take out, you know right off the top you're going to have to take 15.3% for your Social Security and FICA. Half of that is the employee portion and half is the employer portion. The employer portion is put on your 1040 at the end of the year as a deduction.

For your withholding taxes, you'll need to estimate how much you think you will be making and take out the approriate withholding. You can look at the tables here:

http://www.irs.gov/pub/irs-pdf/p15.pdf

For paying the taxes go here:

https://www.eftps.gov/eftps/

You have to sign up with that site and it takes probably a week or so to get all the paperwork and PINs set up, but it's worth it. It makes it very, very easy.

For your state withholding, google your state and tax and you should find a web portal for your state taxation and revenue department where you can make your payments to them for your state withholding. I usually pay about 5% for my state taxes, and it works out for me. In that same website for your state they will probably have a download of the tax tables that you can look at to make a better estimate of what you should withhold.

If all of this sounds like so much greek to you, you're probably better off finding a good bookkeeper or CPA to walk you through it the first year or two and then you can do it on your own.

Good luck.

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