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Question on Taxes

by Neodism
13 replies
If I am offering a marketing service to offline clients who pay me via checks, how much should I be putting back for taxes? When I reach my income goal of $3,500 a month, how much of that should I be saving?
#question #taxes
  • Profile picture of the author P1
    I always heard it's safe to keep 30-40% for taxes.
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  • Profile picture of the author Neodism
    I feel like that's an absurd number. There's no way that you will need to save almost half for taxes. Or even a fourth. I've always thought it was about 10%, but, obviously, I'm not sure.

    You may be safe saving 30%, but that's much more than you will have to pay. No doubt about it. In my hourly/salary job I believe they take out in between 10 and 15 percent.
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    • Profile picture of the author iAmNameLess
      Originally Posted by Larches View Post

      I feel like that's an absurd number. There's no way that you will need to save almost half for taxes. Or even a fourth. I've always thought it was about 10%, but, obviously, I'm not sure.

      You may be safe saving 30%, but that's much more than you will have to pay. No doubt about it. In my hourly/salary job I believe they take out in between 10 and 15 percent.
      Ummm... are you a CPA? Do you work for yourself? I don't think giving advice on this is something you should be doing when you have no idea what you are talking about. You pay about 15% at your job because your employer pays the other half. Self employment tax is 30-33% possibly 35%. On top of that you may have state taxes.

      Save your receipts, and set back 40%. It is better to be safe than to have to worry about penalties you will get from the IRS.
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  • Profile picture of the author PhilaPM
    The social security tax alone is about 15%. Remember now you're a business owner so you are required to pay both sides of the tax.
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  • Profile picture of the author GuestPostShop
    May be you should start by telling us where are you based, so we can have a better idea. The amount really depends on your location.
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  • Profile picture of the author Neodism
    I live in and operate in Texas.
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    • Profile picture of the author David Miller
      Originally Posted by Larches View Post

      I live in and operate in Texas.
      No state taxes....15% should be more than adequate.
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  • Profile picture of the author Monitium
    It really depends as to how much you are writing off, are you incorporated, and what state you live in. If you are not incorporated, you need to take 15% off the top for social security and medicare that you have to pay when self employed income is earned.

    Then you can check the tax tables for adjusted gross income depending on your projected write offs. You can check the IRS site for these tables. The only way you do not have to pay the above mentioned 15% is if you are incorporated. You should do a cost comparison in your state based on the cost of incorporation and fees for it to make sense to incorporate.

    Hope that helps and good luck!
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  • Profile picture of the author Aussieguy
    My comment: Respect Accountancy. Get an accountant!
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  • Profile picture of the author kristinecpa
    Everyone's situation is different, but if you are self employed you need to withhold enough taxes to cover the self employment tax in addition to your regular income taxes. Since you're in TX, no state tax, but your federal taxes will depend on your other income, your filing status, your deductions, etc.

    A common rule of thumb is to withhold 30% for taxes. This is because the self employment tax alone is 15.3%, add another 10-35% for federal taxes (depending on which tax bracket you fall in), and another 5% (approx.) if you live in a state with income tax. Now you can see why 30% is a rule of thumb for self employed people.

    If you are newly self employed and you've never dealt with SE taxes and estimated tax payments before your best bet is to hire a tax professional to help you learn the ropes. Good luck...
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  • Profile picture of the author bryson
    I know most of the "typical" deductions, like car, meals & entertainment but what are some additional deductions that someone in online/offine marketing may not have though of as an expense deduction?
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    • Profile picture of the author kristinecpa
      Originally Posted by bryson View Post

      I know most of the "typical" deductions, like car, meals & entertainment but what are some additional deductions that someone in online/offine marketing may not have though of as an expense deduction?
      Web hosting fees
      Fees for domain names
      Membership fees
      Fees paid for relevant courses (i.e., SEO course, web design course)
      Paypal or shopping cart fees
      Advertising fees (Google Adwords, banner ads, sole ezine-ads)
      Legal fees (to setup your business, to have a privacy policy created, etc.)
      Accounting fees
      Bank charges
      Internet service (business use only!)
      Phone (cell phone, fax, skype subscription)
      Software
      Computer (business use only)

      There are many more that could apply, but these are some typical expenses incurred by internet marketers. Feel free to add to this list if I missed any...
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  • Profile picture of the author naturegirl321
    If you're Self employed it's 13.3%, it was 15 point something percent, but just dropped. That's my case. I'm not sure about the 30% ish that everyone's talking about and I don't know about state since I live overseas. I don't have regular income tax either.

    After ten years of doing the 2555 among others, this year I've decided to hand off all my taxes to an accountant. Bit expensive, but well worth it. 329 bucks is nothing compared to the fees I'd have to pay if I made a mistake.
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