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taxes on a freelance job
Posted on 11/28/10 at 5:54 pm
Posted on 11/28/10 at 5:54 pm
I have a full-time job and am taking on a 2nd freelance job. I'd likely have 20-30ish hours per month. Should basically be paid a straight hourly rate, no taxes will be taken, I believe.
My full-time job doesn't pay OT standards and I'm single, no dependents.
What should I budget of this money to save for taxes when filing for 2010, which will be only a month of income? Especially needed for filing 2011 taxes.
My full-time job doesn't pay OT standards and I'm single, no dependents.
What should I budget of this money to save for taxes when filing for 2010, which will be only a month of income? Especially needed for filing 2011 taxes.
Posted on 11/28/10 at 7:17 pm to TinyTigerPaws
One very important issue you need the free-lance employer to answer for you is if they will file a 1099 with the IRS on the income they pay you.
If so, you will probably be considered self-employed on that additional income and that means you will have to pay self-employment taxes, which currently is about 14.5%. If your primary job's income takes you over the payroll tax limit (which for 2010 is $106,800) you may not have to pay the self-employment tax.
As to your other question, you have to determine your current federal marginal tax rate and then see if the additional income will take you into the next higher marginal rate bracket. Unless you are on the upper edge of the bracket, it probably won't do that, so just use your fed marginal tax rate to determine the extra taxes on your free-lance income. You can use this website LINK to help you determine which bracket you're in and how much your additional fed income taxes will be.
The maximum Louisiana state income tax bracket is 6%.
If so, you will probably be considered self-employed on that additional income and that means you will have to pay self-employment taxes, which currently is about 14.5%. If your primary job's income takes you over the payroll tax limit (which for 2010 is $106,800) you may not have to pay the self-employment tax.
As to your other question, you have to determine your current federal marginal tax rate and then see if the additional income will take you into the next higher marginal rate bracket. Unless you are on the upper edge of the bracket, it probably won't do that, so just use your fed marginal tax rate to determine the extra taxes on your free-lance income. You can use this website LINK to help you determine which bracket you're in and how much your additional fed income taxes will be.
The maximum Louisiana state income tax bracket is 6%.
Posted on 11/28/10 at 7:53 pm to TinyTigerPaws
or save about a third of your income for taxes.
This should be enough.
This should be enough.
Posted on 11/28/10 at 8:56 pm to LSURussian
The employer mentioned a w-9 and i'm sure all of the income will be on the up and up with the IRS. I was thinking 1/3 just as a guess.
Should be fun at tax time this year......bleh. Do I have the ability to "write-off" expenses for this? Like office supplies, computer, etc?
Should be fun at tax time this year......bleh. Do I have the ability to "write-off" expenses for this? Like office supplies, computer, etc?
Posted on 11/28/10 at 9:23 pm to TinyTigerPaws
Poodlebrain is the sole MoneyTalk Board tax authority, but my personal answer is yes, if you file a Schedule C for self-employment income. I do.
Posted on 11/28/10 at 11:41 pm to TinyTigerPaws
quote:
Do I have the ability to "write-off" expenses for this?
Yes. Part II on page 4 titled "Expenses"
If you have less than $5k per year in expenses, you should be able to use the Schedule C-EZ. That is what I use.
Posted on 11/28/10 at 11:44 pm to TinyTigerPaws
A Form W-9 is used to gather the taxpayer identification of a non-employee for purposes of issuing a Form 1099. In your case your taxpayer identification is your Social Security Number, and you wil get a Form 1099-Misc reporting non-employee compensation if they pay you $600 or more.
You will have to report the income on Schedule C along with any allowable expenses you paid to earn the income. The net income will be subject to self-employment tax. For conservatism figure you will owe 15% of the net income for self-employment tax. You can claim a deduction for one-half of the self-employment tax against your income tax.
Since you have to make a projection of your net income from the Schedule C activity to estimate your self-employment tax you have all the information you need to project the impact on your income taxes. Just multiply the self-employment income by your marginal tax rate and figure that is how much income tax you will owe.
You may want to sit down with a CPa and discuss what kind of record keeping you should do to track your expenses associated with the freelance job. If you stay with the job for extended periods you may have to make quarterly estimated tax payments or adjust your withholding from your regular employer.
You will have to report the income on Schedule C along with any allowable expenses you paid to earn the income. The net income will be subject to self-employment tax. For conservatism figure you will owe 15% of the net income for self-employment tax. You can claim a deduction for one-half of the self-employment tax against your income tax.
Since you have to make a projection of your net income from the Schedule C activity to estimate your self-employment tax you have all the information you need to project the impact on your income taxes. Just multiply the self-employment income by your marginal tax rate and figure that is how much income tax you will owe.
You may want to sit down with a CPa and discuss what kind of record keeping you should do to track your expenses associated with the freelance job. If you stay with the job for extended periods you may have to make quarterly estimated tax payments or adjust your withholding from your regular employer.
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