How do I take take out of my check
I just started a new job as a contract employee. The employer does not take out taxes, they said I would have to do this myself. How do I do this? Do I have to do this quarterly or just at the end of the year? Federal? State? FICA? or anything else?
Answers
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You're no longer an employee; you're self-employed. Read up: https://www.irs.gov/businesses/small-businesses-self-employed/self-employed-individuals-tax-center
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https://www.irs.gov/businesses/small-businesses-self-employed/self-employed-individuals-tax-center
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https://www.irs.gov/businesses/small-businesses-self-employed/self-employed-individuals-tax-center
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I recommend paying through IRS DirectPay every month.
Since you are self-employed, you have to pay income and self-employment tax. For most people this can end up being between 18% and 30% of their total income. The self-employment tax is an almost flat tax of 15.3% of your business income - this covers the FICA and Medicare taxes.
If you have a quickbooks (or other accounting software) file that you have up to date every month, I would recommend at least 15% of your net income (income after expenses). The full 20% to 30% would be safer if you want to be sure you do not owe.
If there is no bookkeeping software that is kept up to date, I would still try to pay at least 15% on the checks you receive. In the bare minimum, I would recommend paying on 10% of the checks that you received every month - you will still likely have a balance due at 10%, but not as much if you paid no estimated tax payments.
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