1099 - How Much Should I Set Aside for Taxes?

If what bigmike said is true, thats illegal as hell. I think it was UPS or Fedex on of those two trucking companys got the snot sued out of them for that very thing many years ago.

 

It IS ILLEGAL "as hell" as you put it.

The IRS has a formulae for identifying who is an independent contractor and who is not. I will post the link here for those that are interested;


http://www.comptroller.ilstu.edu/downloads/20-factor-test-for-independent-contractors.pdf

A simpler format from OHIO state university is here;

http://ohioline.osu.edu/cd-fact/1179.html

 

What is the name of the company? I'll report their axxes to the IRS my #### self.

 

Yes it is illegal-but he is already doing it--so if he chooses to continue and to answer his question 1/3 is a very good estimate--but IMHO--I would put back 40%--especially if you are in a state with state income tax--and as a contractor you should(not required)to pay both sides of social security--like you would be credited with if you were an employee--makes quite a difference--besides worst case--you have kept out a little too much--and use the xtra to enhance your retirement fund or some other smart investment
Just my $.02

 

If you are not familiar with form 1040-ES, it might be a good idea to pay a tax accountant to help you get set up.

Setting aside about a third of your income is a good idea. This will only be good for the current year, however. Your employer will send a 1099 to the IRS this December or January. The IRS will consider that to be income from being self employed, So starting in 2012 you will have to pay estimated quarterly taxes (if you still work for them). Whether or not it is legal for your employer to do this is a separate issue. If you agree to be paid this way, you are self employed and in business for yourself as far as the IRS is concerned.

http://www.irs.gov/businesses/small/article/0,,id=110413,00.html

 

i'd put away (on average) of 25% of the weekly pay.....i know that can be a lot, but after you file your taxes you might still get a refund..

now i say 25% because when i just did my weekly earnings, 25% is about right on target....

also, you can pay quarterly as well...for this, you really should have an accountant set up the payment plan for you....

whatever.....

 

Uhn if your going with the self-employed you had better be paying quarterlies. The Feds get testy when you make them wait a whole year.


You are in all likelihood misclassified and should be a statuatory employee.Hope your getting about$ .50 a mile for being an I/C to cover what they are not paying for.

 

It doesn't matter if you've driven for them for 10 years. They are the ones who are breaking the law so they, not you, are the ones who have to pay the fines if they get caught.

But they will only get caught if you or someone else turns them in. I would expect that you have no intention of turning them in since you probably don't want to lose your job. But you need to be aware of a few things if you're going to continue to work for them.

First and foremost, they stealing money from you. There are taxes that employers have to pay for employees. But since they're calling you an independent contractor, you will have to pay those taxes instead of them. That translates to less take home income for you at the end of the year than you would have made if they were paying as an employee on a W4. There are other downsides as well. As an independent contractor, you have no unemployment insurance or workmans compensation.

So you are working for a company that is willfully breaking the law and stealing money out of your pocket. Is that really someone you want to work for? I know times are tough but my advice would be to look long and hard for a job with a better company and quit this job the moment you get hired by someone else.

As for taxes, 33-40% is a safe number. But the best thing you can do is sit down with an accountant now to discuss your entire situation and make a plan for the rest of year in terms of how much to set aside, where to set it aside and what things if any you can do to maximize the deductions you'll be able to take next April. Spending some cash for a consultation now could end up putting a lot more money in your pocket at the end of the year.

 

actually, i WAS going to say 35%, in fact i did, but quickly changed that, because i was looking at my tax deductions and take home pay...for me, about 25% was nearly on target...but yes, paying a 'bit more" will only help in the long run, and any over-payments can be applied to the next quarter....