My husband is an architect currently employed with a firm. He just got a freelance job on the side, which is expected to pay him around $26,000 over the next year or so. (This is additional money on top of his salary from the firm, which is around $55,000.) My concerns are: 1. How do we figure out how much of this will be owed to the IRS / state of California in taxes? (We want to set the money aside as we go so that we don't get screwed in April...) 2. Is it true that we have to pay quarterly taxes? 3. Does my husband need to file for some sort of tax ID number for this independent job he is doing on the side? 4. This freelance money is obviously separate from my husband's salary from his firm, but is all the money reported on the same tax forms? 5. Anything else we need to know that we're not even thinking about?? Please help! So confusing...
United States - 8 Answers
Random Answers, Critics, Comments, Opinions :
1 :
It depends on if he's filing separately from his mistress or not.
2 :
1 dunno about california but federal is about 35-40% 2 quarterly WILL HELP! 5% each quarter will make a difference in the final return. 3 not really his ssn will pretty much cover it. 4 same tax from and its reported as extra income. 5 quit worrying. But follow advice #2 especially.
3 :
I have a tax accountant to handle all my taxes. It is not a great expense and it makes less worry for me PLUS she says if the IRS comes knocking I am to send them to her. Check in your area for those who do taxes and find out thier fees, it may well be worth it for you. Otherwise, check out the current rates for the applied taxes and put that into an account. You don't have to pay quarterly, but you may wish to do so to avoid a larger payment at tax time. Your husband's ss# should work as a tax id unless this becomes a new business. Remember to use all possible deductions including depreciation on puters and such if they are part of the job.
4 :
Federal tax rates are pretty standard. Tax brackets are posted on the Irs.gov site and you can even find an estimate schedule. If you are worried about getting screwed it might be a good idea to pay them quarterly based on the schedule on that site but you dont not legally have to pay quarterly (yearly is enough). California I am sure has some thing like that but I do not know because I do not live there. Your husbands social security number should be enough if you plan on filing the income as personal income. You can even use the SS number if you file as a business. You should be able to file all money on the same tax forms depending on how the company paying the freelance work reports it to the government. You might want to consult a local tax professional for specific to you information.
5 :
1. Look up the tax tables on line and send in a quarterly estimate. Tax software like Turbo tax will also do this for you and fill out the forms quarterly. 2. Yes but your husband's "real" job can over withhold. You can get away with this tactic the first year. 3. No - assuming he has no employees. 4. Yes, it is combined with other household income and filed with your return. 5. Probably, but I don't know what. Actually you didn't mention your income. If you have a minimum type job and have to pay for child care etc., I'd suggest that you quit. Your money will be taxed at the higher rate of your combined income. So you'd essentially be working to pay for childcare and taxes. It sounds like you have a pretty good handle on it.
6 :
Join 5 million other Americans and sign a petition to pass the legislation for the Fair Tax. 60 members of the U.S. House of Representatives are already co-sponsors of HR25 the bill that would eliminate the IRS and payroll taxes and capital gain , inheritence, death taxes and more.
7 :
You are probably in a 15% federal bracket, and most if not all of the extra income should also be in the 15% bracket, so federal income taxes should be around $3900. He'll also pay 15.3% self-employment tax on the side job, close to another $4000. These are maximum amounts for federal taxes. The amounts could decrease, possibly substantially, depending on what associated deductible expenses he has for the side job - it's impossible from the info you give to estimate that. Yes, you'll need to make quarterly estimated payments, paying in 1/4 of the amount you expect to owe each time. He'll just use his social security number for the side job - no additional tax id number is needed. The income and expenses from the side job will be reported on a schedule C or C-EZ, and he'll use schedule SE to calculate self-employment tax. The numbers from the bottom of those two forms will transfer to your 1040, and added to your other income there. I don't know how much you might owe for CA tax. Good luck. It really isn't all that complicated. If he has expenses for the side job, keep very good records. It might be worth talking with a CPA to get information on what might be able to be deducted.
8 :
1. The best way I know of to figure you taxes for next year is to go to your 2006 return and add in the anticipated income and see what the difference is. But as a ballpark figure, if your tax rate is 15%, and you also will need to pay about 15% of Social Security and Medicare taxes on this money, then you should figure 30% of the net income will go to federal taxes. Assuming he has some expenses such as equipment, supplies, and mileage, you should be counting on $6,000 of additional taxes for federal, and almost $2,000 for California. 2. If you don't pay quarterly federal taxes, and end up owing more than $1,000, you will be subject to a penalty. In truth, the penalty isn't all that much for a few thousand dollars. The real problem is that if you don't have the cash to pay those taxes right away, then you also have to pay interest. So it is good planning to send in quarterly payments. If he is earning all this $26K in 2007, then you should be sending in $1,500 a quarter or so for federal. Use Form 1040ES which you can find on irs.gov. You can also send in California estimated taxes or be prepared to pay the extra tax when due. 3. A tax ID (EIN) number is not required. However, it is easy to get an EIN from irs.gov and doing so he will not have to give out his SSN to anyone in connection with self-employment. So it is a good idea. 4. He will fill out Schedule C and attach it or include it with your regular individual tax return. This is assuming he will be operating as a sole proprietor. 5. None of this is as complicated as it sounds. You could hire a preparer, or just go to IRS.gov and read up on how to fill out Schedule C and estimated taxes
Read more discussions :
- What is a reasonable pay for a freelance journalis...
- How can I get a freelance job at home
- How can a designer get a freelance job
- How can I find a graphic design freelance job
- How can I keep my freelance job from suffering dur...
- What is a job that can be done freelance where you...
- How do I bid on a job freelance job proposal
- How can I get a good freelance programming job lik...
