I earn $400/month and live in Boston. I've read about making quarterly payments, etc. Also, what percentage (or what amount) will I have to pay at the end of the year? Does it affect my normal job and what I will have to pay for that? This is just some extra income.
United States - 3 Answers
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1 :
If this is *extra* income, plan on at least 30%. You can bump your W-4 at work to withhold extra tax and then skip the quarterly payments.
2 :
You must claim this extra income as Business Income. You must also claim any expenses related to that income. Here is how it is calculated; Total business Income - Business Expenses = Net Business Income This business income will be added to your normal income from wages and other income, such as, interest, dividends, etc. If you have any adjustments, such as student loan interest, or half of the Self Employment Tax, etc., Adjustments will reduce your total income and produce the AGI (Total Income - Adjustments). Adjusted Gross Income. Here is an example; You are Single with no dependents Your wages $30,000 Your Business Income $4,800 ($400 X 12 months) No other income Your Total Income = $30,000 + 4,800 = $34,800 Your AGI = $34,800 - $339 (half of your SE Tax) = $34,461 (assuming you don't have any other adjustments) Your Taxable income = AGI - Standard Deduction - Personal Exemptions Your Taxable Income = $34,461 - $5,700 - $3,650 = $25,111 Your Tax = $3,349 Your Tax credit = $400 Total Tax after credit = $2,949 Self Employment Tax = $678 Your Total Tax Liability = $3,627 <<<---This is how much tax liability you would have if the assumptions above are correct. Let me know if you have any more questions, tax.eezi@gmail.com
3 :
You can deduct expenses that were paid to generate your free lance income. If you aren't familiar with what kind of expenses are deductible, a helpful guide for small self employed persons is "Tax Guide 2008" published by Walters Kluwer. It's available at most large book stores or at www.toolkit.com After you know what your net self employed income is, you will owe 15.3% for federal self-employment taxes. Half of that will then be allowed as a deduction that will reduce your total taxable income. On the net income from free lancing, you will owe federal and Mass. taxes based on your highest tax bracket. That might be 10% or 25% or as much as 35% for "Big" brother and another 5% or 10% for "Little" brother (Mass.). Without knowing the amount of your federal taxable income and filing status, no one can give you an accurate number on how much extra taxes you will owe on supplemental income. If you are single and making less than $32,550, your federal tax bracket on additional income would be 25%. This would be in addition to about 13.4% for federal self-employment taxes (after adjusting for the income tax deduction), plus your Mass. tax. Odd's are you would need to set aside close to 45% for taxes if you didn't want to come up short on your tax return. But if you are
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