Calculating tax for new LLC
In 2023 I launched my first year as an LLC, doing independent contract work. I did not pay any income tax throughout the year on those earnings. I tracked my expenses, but the standard deduction is still higher than those expenses.
I also did non-LLC work for two entities; they did take out federal and state income tax.
I earned about $40,000 total in 2023 between the work I did as an independent contractor and the work for these two entities. The federal income tax that was taken out amounts to almost exactly $3K. I have done calculations and believe this means that the 3K that was taken out already should cover what I owe for the full year for federal income tax. Would you agree that that's accurate?
(All this work took place in Colorado, where I reside, if that's important to know).
Answers
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Hello, PortiaMalcolm!
That is a great question!
You should note, that you can claim business expenses AND the standard deduction.
You should also note, that in addition to income tax, you'll also owe self-employment tax on your contractor income. The self-employment tax rate is 15.3%.
I recommend entering estimated figures within FreeTaxUSA's 2023 software. This will give you a good idea about the amount of tax you'll owe, if any.
