Ready, Set,,,,Here I go.....

Hi Sheepdog. Glad to hear things are going well for you.

 

Great we'll use your numbers ... You've cleared $998 on one statement. So we'll use that as the base

First assumption ... You'll run about 42 weeks for the year, taking 10 weeks off. So your annual net income will be $41916.

Now your deductions on your Schedule C start ... Right off the top you have your per diem deduction ... 42 weeks, 294 days, $59 a day, at 80% is a deduction of $13876 ... your income is now down to $28039.

Now you take every available deduction you can on Schedule C ... Phone, showers, truck wash, tools, this and that - anything you paid for that wasn't taken/deducted from your weekly statement ... Now for me last year that was around $11000 ... but we'll call you more conservative then me and make it $8500 ... taxable income is now $19539 ...

So this is where you figure your self employment tax ... 93% of $19539 ... $18171 at 14.5%, is a self employment tax of $2634 for the year.

Now the $19539 moves over to Schedule A . First deduction, 50% of the self employment tax, $1317. Then your standard deduction of $6200 and your personal deduction of $3950 ... Total deductions $11467, leaving a taxable income of $6704 at a 10% tax rate for $670 in Federal taxes.

You total annual taxes will be $3304 ... Now back to the original assumption of an annual income of $41916 by 12 months, by 3 months for quarterly taxes of $2619 at 25% or $10150 a year about 3 times more than what you will actually owe.

All this assumes you are single ... if you're married you won't pay any Federal income tax at all as you will have another $10150 in deductions leaving only the $2634 in Self Employment tax. At that point you will probably qualify for Earned Income Credit off setting part or possibly even all of the self employment tax, if you have any children.

So yeah, depending on your personal situation if you paid around $2620 in quarterly taxes you paid close to, at least, 80% or more of your annual tax obligation in one quarter.

 

I've heard of a lot of guys just bailing out of practically all expenses and living in their truck for a year or two to help get right with their finances. I kind of did that myself for 6 months during my first OTR job. Just had my permanent address at my dad's house so no rent, no car payment, no cc debt, had $10,000 cash in the bank.

 

+1

If a guy has no wife, kids, car payment, house payment -- that 40k starting out is probably equal to about 80k in the real world.

Not to mention, how great is life without a wife, kids, or a house to maintain!!!!

 

Id find it boring, empty, and materialistic. I'd have STUFF up the wazoo!
I don't think I'd be happy though. Now if I would have done all this before wife and kids, now we are talking!

 

I wouldn't want to go on in life without them.

 

I'm glad to hear it. A good marriage is a great thing, its just that most don't work, and not many of the remaining ones are happy. You won the lottery.

Btw, I was speaking generically about the kids in terms of a simple lifestyle for those starting out. I have one and she is by far the biggest part of my life.

 

To be honest ... I don't even pay quarterly taxes ... I just pay the penalty when I file .. So far that has been between $9 to $54 ... I'll pay that just to not screw with taxes more than once a year.

To many tax accountants ask/use that 25% for two reasons ... First they would rather have you overpay taxes than have you pissed at them for under paying. I do my own and I may cut more corners than an accountant. It's a simple risk reward equation. If the IRS comes back and whacks my pee pee, then I pay fine and penalty, maybe. If not, I'm ahead.

The second, if the accountant has you over pay and you get a refund back - and you will - too many fools fail to realize that was their own money to start with. They love their accountant for the money they save them and the big refund they got. Makes it too easy for an lazy/incompetent accountant to hide behind a big refund.

Taxes aren't hard, their just laborious.