How Much to Set Aside each week for Taxes ?

28percent of your net

 

The last 4 years ive been owner op ive paid less than 10% of gross in taxes. Something to think about if you can swing it, you can put $17500 into a solo 401k, tax deferrred, and you can also put $5500 into an IRA. You can do both or one of them. Keep in mind you must have the 401k account open by 12/31,the IRA you can open it 4/14 if you want. Must have funds in both by 4/14, but I would do it sooner so your tax professional would have time to get it all done. Ive been doing this every year and paid almost 0 in federal withholding, all of my money paid in has gone to self-employment taxes.

 

your doing it wrong! lol

 

If you dont pay quarterly you get finded a certain %. Cant remember what %

 

10% of net is a safe estimate, at least it's close to what we pay although we have other income that is taxed as it goes out. Do you have to pay every 3 months? no, do you have to pay your total estimate? no. Switching from an employee to a L/O we were off, after paying last year's taxes we couldn't pay the 1st quarter tax, but we made the 3 other quarter payments, although the 4th around Christmas was short. Either way when you figure out the new year they can say you made 3 payments totaling $X and then that is subtracted from what you owe either giving you money back or giving you a payment to make. The idea is to be close and we are adding more some quarters knowing it may be less on others. I copy all my checks and quarterly statements before I send them in, just in case something happens, the IRS usually has no problems cashing them.

 

There's some argument over the quarterly thing.
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Self-Employed-Individuals-Tax-Center Read What are Self Employed Obligations. Says Quarterly.

 

Estimated taxes are due quarterly and you are penalized for not paying them. Source: I found out through experience several years ago.

 

You can also have a HSA. health savings account to help reduce your tax bite. No I would not spend the rest. You need to have money set aside for repairs and other unexpected expenses.

 

I would put back at least 20-25% of your net for taxes. If you are a sole proprietorship, you will pay 15% in self employment taxes. If you are incorporated, you could pay yourself a smaller salary and dividends on the rest and save the 15% tax on dividends. You will still be liable for the income tax. I have a friend who is a sole proprietorship and even after his many deductions, IRA, etc., he paid 18% of his net in taxes last year. There are new taxes that will go into effect in January. If you save more than needed for taxes, you can put the rest into your maintenance account.