Self Employment Tax

What is the name of your state? Nevada

Hello,

I have a full-time job where I'm paid as an employee. That means taxes are taken out each pay period by my employer.

In addition, I have a part-time job that pays me as an independent contractor. I'm paid (hourly rate * hours worked). No taxes are taken out.

I would like to know what the tax rate will be on that.

I earn roughly $1,000/month from that job.

Thanks for your help.

fw12 said:

What is the name of your state? Nevada

Hello,

I have a full-time job where I'm paid as an employee. That means taxes are taken out each pay period by my employer.

In addition, I have a part-time job that pays me as an independent contractor. I'm paid (hourly rate * hours worked). No taxes are taken out.

I would like to know what the tax rate will be on that.

I earn roughly $1,000/month from that job.

Thanks for your help.

Click to expand...

It depends on your marginal tax rate.

Self employment tax will be approx 15 1/2 percent, and then regular income tax rates apply on top of that. Those could be anywhere from 10-28 percent. They could be higher than that as well, but its unlikely that you would fall in the upper brackets.

If you have expenses connected with the income, then those would get deducted first.

Don't forget that you are also obliged to make estimated tax payments on your self-employment income.

The IRS wants to help you. Start on this page:

http://www.irs.gov/businesses/small/index.html

There's a link there for self-employment info.

If the OP figures out what his/her tax obligation is and has a sufficient amount taken out from the job that will issue a w-2, he will be covered; this would be to have extra taken out from each paycheck. The key is to NOT owe more than $1000 when filing a tax return.

OP - you may save yourself a lot of grief by seeing a tax professional this time of year and have them help you figure this out. You don't want to face penalties with the IRS come tax time. It would be worth the $20-50 they may charge to calculate this.

Thank you so much for your responses.

Ginny J, I understand your advice about consulting a tax pro. I'll do that. Nevertheless, I also like to do as much research on my own so I'm not totally uninformed.

FlyingRon, I only started the independent contractor job in September. So, no tax is due until Jan 15. Federal quarterly estimated tax deadlines are April 15, June 15, September 15, and January 15.

LdiJ, further research on my part shows that the 15.3% tax is the sum of 12.4% for Social Security, and 2.9% for Medicare. Furthermore, I found out I get to reduce self-employment income by 7.65% before applying the tax rate.

fw12 said:

Thank you so much for your responses.

Ginny J, I understand your advice about consulting a tax pro. I'll do that. Nevertheless, I also like to do as much research on my own so I'm not totally uninformed.

FlyingRon, I only started the independent contractor job in September. So, no tax is due until Jan 15. Federal quarterly estimated tax deadlines are April 15, June 15, September 15, and January 15.

LdiJ, further research on my part shows that the 15.3% tax is the sum of 12.4% for Social Security, and 2.9% for Medicare. Furthermore, I found out I get to reduce self-employment income by 7.65% before applying the tax rate.

Click to expand...

I was being somewhat general when I answered you before...but if you want it down to the nitty gritty...

You put your self employment income on Schedule C. You deduct your expenses to come up with your net self-employment income. You carry that income to Schedule SE and calculate your self employment tax of 15.3%. You carry 1/2 of the self employment tax to the front of the 1040 as an adjustment to your total income. You then deduct either your standard or itemized deductions and your personal exemption to come up with your total taxable income, and then you apply the rates from the tax tables to come up with your tax.

However, for the purpose of estimating tax and estimated tax payments, its wiser to leave a little bit of cushion, therefore 15 1/2 percent for self employment and applying your marginal tax rate, generally gets the job conservatively done.

You also need to take your state taxes into consideration as well.

No state tax in Nevada.