I have a full-time job and do freelance on the side. I will be getting a 1099 at the end of the year from my side work employer. I have been saving 25% of the pay in my savings account for when tax time comes around to pay what's needed. Is this all i need? I ask cause i heard about being considered self-employed and having to pay social security and etc out of your freelance checks. Does this not count since i have a full time job in addition? Or does uncle sam want SS, and medicare from my sidework money too?
United States - 4 Answers
Random Answers, Critics, Comments, Opinions :
1 :
Yes. It is called Self-Employment tax. It is around 15% of your net. If you are already over the social security limit for the year ($102,000 for 2008) your self-employment tax is only around 3%.
2 :
Read about self employed (1099-Misc) tax treatment: http://taxipay.blogspot.com/2008/04/tax-filing-by-self-employed-sole.html
3 :
I assume that your full time job takes out enough tax that without the side job, you wouldn't owe more at the end of the year. If they do, then yes you just make your quarterly estimated payment based on your freelance work. Don't just save the money, send it in quarterly with form 1040ES - if you don't, and owe over $1000 when you file, you can be penalized. 25% might or might not be enough, depending on what tax bracket the two jobs together put you in. And it will most likely not cover both federal AND state - you might want to increase that amount to 30%, or even more if you live in a high tax state or have local income tax also. On your freelance checks you'll owe around 14% for self employment tax which is for social security and medicare, plus federal and state income tax. If your total income from the two jobs is over $100,000 then the self employment tax will be much lower since you won't pay ss on all of it. Medicare taxes have no limit.
4 :
Unless you have extra withholding on your W-2 job, you should be filing quarterly estimated taxes 25% is a good starting point. . . you need 14% for SS and Medicare and then for FIT and SIT, depends on your tax bracket, if you're only in 10% you're fine, but if you're in higher tax bracket, you're not CAN adjust your withholding at work by filing a new W-4 claiming 0 exemptions until the end of the year IRS can assess penalties and interest if you're not paying in 90% of what you actually owe, and since you're not doing the Estimated Quarterly filings, you better make sure you're close
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