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what percent do you set aside for taxes?

by im2park
6 replies
Hey small business owners,

What percent of your profits do you set aside for taxes?

I'm going to be putting away money for taxes into my business savings account. I'm located in the USA. Just curious about the percentage you guys put away for taxes
#percent #set #taxes
  • Profile picture of the author Kay King
    When I began earning sufficiently online, I still had a "day job" . Instead of saving separately, I increased the amount withheld for taxes from my day job. As my online income grew and my day job went from full to part time...I kept increasing withholding even though it meant "paychecks" were quite small in the end.

    When I quit the job I began putting 30% of my earnings into a "tax acct" as I filed quarterly. How much you put back depends on your tax bracket, I guess.

    I'm glad you are thinking of this - amazing how many IMers don't consider taxes until they run smack into them. Estimate what you might owe - or just put back as much as you can and if there's money left over after paying taxes....it's all good!

    kay
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  • Profile picture of the author AnniePot
    Excellent advice Kay, you're spot on. One third of your income is always a good estimate and after tax time at the end of the year, there's always a bit left in the kitty.
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  • Profile picture of the author im2park
    Thanks Kay!
    i will do 30%, thank you for the advice

    I've heard so many horror stories of newbie IMers not thinking about taxes and then get slammed on tax day with all their taxes they forgot about.

    I will put 30% into my business savings account.
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  • Profile picture of the author Jason Kanigan
    I second the 30% figure.

    Since we're business owners and play a different game than employees, our taxable income can be quite a bit lower. But then we have a bonus on our hands and that's a happy thought...particularly when contrasted with the alternative of not having set aside enough.

    Speak with your accountant as they will give you the best advice; we are not accountants and cannot give you "professional" advice in that department.
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  • Profile picture of the author Oziboomer
    Kay you are right with putting 30% away.

    Once you make your first profit in Australia you then have to make payment instalments in advance which the first time round is like a double edged sword because you have a tax bill and you have to start paying in "advance" - quarterly for next year.

    You can make variations but these have to be valid variations.

    The calculator the Aussie Govt provides for people to work out their advance liabilities is here.
    https://www.ato.gov.au/Calculators-a...Comp/questions

    Best regards,

    Ozi
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  • Profile picture of the author EPoltrack77
    30% of all my income goes into my tax account!

    Very important to manage your business properly. When I first got started online I did not do that and I was making over $400 a day with adsense. Had a big tax bill at the end of the year with no money set aside for it. Big learning curve...
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